Nigeria’s economy enters 2026 on a trajectory of cautious optimism, transitioning from post-reform stabilisation to modest recovery, even if challenges persist.
Macroeconomic indicators show improvement, but translating these gains into tangible relief for households remains critical to sustaining public confidence.
The IMF forecasts Nigeria’s GDP growth at 3.9 per cent for 2025, rising to 4.2 per cent in 2026, positioning the country as Africa’s third-largest economy with a nominal GDP of around $334 billion.
The Centre for the Promotion of Private Enterprise aligns closely, projecting 4.0-4.5 per cent growth in 2026, driven by non-oil sectors like services, telecommunications, finance, construction, real estate, and trade, which accounted for 53 per cent of GDP by Q3 2025.
Fitch Ratings assessment projects a 4.3 per cent GDP growth rate, supported by rebounding domestic demand, easing inflation, and slight oil production gains to 1.73 million barrels per day.
While inflation has decelerated sharply from 24.48 per cent in January 2025 to 14.45 per cent by November, thanks to naira stability and improved supply chains, projections for 2026 are still 17.3 per cent average per the African Development Bank, lowering to around 14 per cent by year-end.
Similarly, interest rates may ease gradually. The CBN cut the Monetary Policy Rate by 50 basis points to 27 per cent in September 2025, with potential further reductions to 24 per cent or 12.5 per cent as inflation moderates, spurring private investment.
The naira has stabilised in the N1,440-N1,500/$ band, bolstering business confidence, while foreign exchange reserves hit a five-year high of $45.24 billion by late 2025, projected to range $40-55 billion in 2026, offering nearly 11 months of import cover.
However, rising debt levels pose significant risks, with service obligations exceeding N15 trillion in the 2026 N58.18 trillion budget or about 50 per cent of projected revenue. This constrains the fiscal space after oil revenue shortfalls, with actual prices hovering at $66 per barrel for 2025 compared with the budgeted $75, while oil production remained muted at an average of 1.66 barrels per day, much lower than the 2.06 million bpd estimate.
Indeed, most investment banks and the EIA forecast that average oil prices will fall below $60 per barrel in 2026 due to an emerging and persistent market oversupply, per an oilprice.com report.
What is clear, regardless, is that Nigeria has shifted from “risk watch” to “recovery watch,” as noted by Femi Awoyemi, Chairman, Proshare, in his remarks at the think-tank’s 2026 Economic Outlook Conference in early December.
This is marked by Nigeria’s FATF grey list exit, credit rating upgrades from S&P, Moody’s, and Fitch, FX reforms, and positive NESG-Stanbic IBTC Business Confidence Index readings.
CPPE’s Director-General, Muda Yusuf, describes 2026 as a “turning point,” with reform momentum enabling decisive growth if security improves and pre-election fiscal discipline holds.
However, VerivAfrica’s outlook attributed 2025 stabilisation to exchange rate liberalisation and subsidy removal, though high energy costs, insecurity, and bureaucracy remain as bottlenecks stifling further growth.
As with 2025, analysts project growth areas to include the digital economy with revenues up to $18.3 billion via fintech and AI; services, which remain a primary engine; and modest agriculture growth of 3.7-3.8 per cent, though manufacturing lags at 1.25 per cent due to power deficits.
While the Federal Government is quick to point out macroeconomic indices as proof that reforms are working, macro stabilisation has not fully eased the cost-of-living crisis, with households facing high borrowing costs, food price volatility, and 139 million people in poverty per World Bank estimates.
Panellists at the Proshare December conference, including Paul Alaje, stress a “transmission gap,” which means gains first hit macro indicators, then businesses, before households, requiring sustained stability over quick palliatives.
Chinwe Egwim of the World Economic Forum urges states to boost grassroots productivity via processing plants, roads, and market infrastructure tailored to local realities, centring women/youth who dominate informal sectors, which account for over 50 per cent of GDP, and 80 per cent of employment.
However, the key challenge for 2026 will be the budget implementation. The 2025 budget underperformed woefully due to oil production/sales shortfalls, weak revenue (missing the N41 trillion target), and debt crowding out capital spending, unlike states, which recorded better outcomes.
The 2026 budget prioritises infrastructure and food security, but there are fears that the government at all levels, despite pressure to perform to put them in good standing to prosecute elections, will simply indulge in binge spending that could fuel inflation without delivering tangible results.
The lessons learned from previous budgetary failures that have seen the Federal Government running the 2023, 2023 supplementary, 2024 and 2025 budgets concurrently are that effective execution demands a timely Medium-Term Expenditure Framework submission (per Fiscal Responsibility Act), an increase in oil production by further curbing theft and sabotage, and also boosting non-oil revenue via tax simplification.
Ultimately, the budget must deliver social services, mainly health, education and infrastructure (power, roads, rail) to stimulate recovery, create jobs, and amplify micro impacts.
The tax reform laws set to take effect on January 1 promise relief for low-income earners and small companies, but compliance should be made easier by massive sensitisation about self-assessment and reporting while avoiding undue confrontation. If citizens see a more transparent and accountable tax system, compliance levels are likely to be quite high.
Here, the government needs to quickly clear the controversy surrounding the alleged discrepancies in the gazetted law to avoid further legislative pushback, which could escalate and ultimately undermine full implementation.
Economists have identified the need to sustain or even accelerate the current recovery by deepening capital markets, which requires regulatory clarity, robust pipelines, and government signals.
To mitigate the risk posed by Nigeria’s rising debt and negative impact on the ability to fund critical infrastructure, experts advocate the partial or full privatisation of government-owned entities and assets such as the NNPC, railways and ports.
The NNPC is sitting on $300 billion worth of assets. Nigeria has little business relying on Eurobonds, forward crude sales and Treasury Bill/Bond auctions to fund the budget if it decides to adopt an asset-driven rather than debt-driven economic growth.
Nigeria in 2026 calls for sustainable reforms with coordinated monetary-fiscal-trade policies to deliver faster growth while addressing critical issues, especially insecurity, which has crippled many farming communities.
State police must be established in 2026; Tinubu has procrastinated too much despite glaring failures of the federal police.
Nigeria’s agriculture policies must be modern and forward-looking, incorporating technology and research with improved extension services and fertiliser availability to improve yields and storage facilities, cold chain logistics and agro-processing to curb post-harvest losses and add value to primary products.
Marketing boards are needed to ensure product offtake at fair prices.
It will be business as usual if this government fails to resolve the power deficit. While the Electricity Act amendments have decentralised the market, the key issue around transmission remains unresolved.
Nigeria needs stable and affordable power as well as affordable transportation/logistics for the required double-digit growth and to lift millions out of poverty. What citizens desire is inclusive growth, not meaningless numbers and indices.
