Nigeria’s economy is entering what the Central Bank of Nigeria (CBN) describes as a critical consolidation phase, with growth projected to accelerate, inflation expected to ease sharply, and foreign exchange conditions forecast to remain broadly stable in 2026—despite mounting global uncertainties.
According to the CBN’s Macroeconomic Outlook for Nigeria (2026), the economy is projected to expand by 4.49 per cent in 2026, up from an estimated 3.89 per cent in 2025, reflecting the cumulative impact of monetary tightening, fiscal reforms, banking sector recapitalisation, and far-reaching foreign exchange market reforms introduced over the past three years.
Growth Momentum Strengthens on Reform Gains
The CBN attributes the improved growth outlook to sustained expansion in the non-oil sector, improved crude oil production, and enhanced investor confidence driven by policy clarity. Nigeria’s oil output is estimated to have risen to 1.67 million barrels per day in 2025, supported by improved security around oil assets, stronger regulatory oversight, and increased investment following the Petroleum Industry Act (PIA).
Non-oil sectors—particularly services, ICT, finance, trade, and transport—remain the primary engines of growth. The services sector recorded solid performance in 2025, buoyed by improvements in road and rail transport, digital financial services adoption, and increased private-sector activity.
Looking ahead, the CBN expects increased domestic refining capacity, infrastructure investment, and a gradually easing monetary stance to further stimulate output in 2026.
Inflation Set for Sharp Deceleration
One of the most significant projections in the report is inflation. After averaging an estimated 21.26 per cent in 2025, headline inflation is forecast to moderate sharply to 12.94 per cent in 2026.
The CBN links the expected disinflation to easing food prices, moderation in energy costs, improved supply-side conditions, and the lagged impact of aggressive monetary tightening implemented since 2023. The rebasing of Nigeria’s Consumer Price Index (CPI) in late 2024 also altered inflation dynamics, reflecting updated consumption patterns.
As part of its broader strategy, the CBN is advancing toward a full inflation-targeting framework, with transitional inflation targets designed to anchor expectations and enhance policy credibility.
Exchange Rate Stability and Rising External Reserves
Foreign exchange market reforms remain central to Nigeria’s macroeconomic outlook. The CBN projects continued stability in the naira, supported by rising diaspora remittances, stronger export receipts, and improved market transparency.
External reserves are expected to rise from an estimated US$45.01 billion in 2025 to US$51.04 billion in 2026, providing stronger buffers against external shocks. The premium between official and parallel market exchange rates has narrowed significantly following the introduction of the Electronic Foreign Exchange Matching System (EFEMS) and the Nigeria FX Code.
These reforms have helped restore confidence among foreign portfolio investors, contributing to increased capital inflows and improved liquidity in the FX market.
Banking Sector Recapitalisation and Capital Market Strength
The report highlights substantial progress in the ongoing banking sector recapitalisation exercise, which aims to strengthen financial system resilience and position banks to support Nigeria’s long-term growth ambitions, including the push toward a US$1 trillion economy.
Nigeria’s capital market recorded a strong performance in 2025, with the All-Share Index posting significant gains, driven by robust corporate earnings, improved macroeconomic conditions, and increased investor participation. The CBN expects the bullish trend to continue in 2026, supported by recapitalisation-driven liquidity and rising investor confidence.
Fiscal Outlook Improves, but Debt Risks Persist
On the fiscal front, the CBN projects improved government revenue in 2026, underpinned by non-oil revenue growth, tax administration reforms, and deeper implementation of the Nigeria Tax Act, 2025.
Federal Government retained revenue and expenditure are projected at ₦35.51 trillion and ₦47.64 trillion, respectively, resulting in a provisional fiscal deficit of ₦12.14 trillion, equivalent to 3.01 per cent of GDP. Public debt is expected to rise modestly to 34.68 per cent of GDP by end-2026, remaining within manageable thresholds but requiring careful debt management.
Global Risks Cloud the Outlook
Despite the positive domestic trajectory, the CBN warns that Nigeria remains vulnerable to global shocks. Lingering geopolitical tensions, rising protectionism, volatile oil prices, and potential disruptions to crude oil production could undermine growth and inflation projections.
The global economy is forecast to grow by 3.10 per cent in 2026, with advanced economies facing slower momentum and emerging markets contending with capital flow volatility and debt pressures.
Policy Coordination Remains Key
The CBN emphasises that sustaining macroeconomic stability will depend on strong coordination between fiscal and monetary authorities, continued FX market reforms, disciplined fiscal management, and structural initiatives aimed at boosting productivity and job creation.
While acknowledging persistent risks, the Bank maintains that Nigeria’s reform trajectory has laid a firmer foundation for stability, resilience, and inclusive growth in the years ahead. The full report is available on the Central Bank of Nigeria’s official website.
