Nigeria 2026 outlook: Stability at last, but on a narrow ledge
After years of monetary dominance, multiple budget operations, and currency market fragmentation, Nigeria is starting 2026 from a firmer macro footing than in recent memory.
The Central Bank of Nigeria forecasts real GDP growth at 4.49 percent in 2026, with average inflation easing and external reserves rising to about $51bn, a set of numbers that reads like an endorsement of reform traction.
Wale Edun, Nigeria’s Minister of Finance and Coordinating Minister of the Economy, has framed the past two years as a shift from emergency economics to rule-based management.
In March 2025, he said the economy “narrowly avoided collapse” after years of reliance on central bank financing “far beyond regulatory limits.” That is his core argument: the reforms were not cosmetic; they were a stabilisation project.
*The FX market is orderly for now but still sensitive to shocks*
The 2026 budget proposal assumes an exchange rate of N1,400 per dollar, signalling a preference for domestic financing and a public commitment to market-based pricing, even if the market remains thin and sentiment-driven at the margins.
This matters because FX volatility functions like a tax on planning. When pricing becomes unstable, corporate balance sheets shorten their horizons, investment pipelines thin, and risk premia widen.
Edun has tied this to transparency and control of public cash flows. In October 2025, he said, “There is a lot of federal government money lying outside of CBN,” adding that the government had introduced a federal billing system to track payments for goods and services and bring funds into visibility.
It is a practical reform, not a slogan. Fiscal visibility reduces leakages and improves confidence that macro tightening will not be undermined by hidden quasi-fiscal pipes.
*Fiscal arithmetic, a bigger deficit, and a funding trade-off*
The macro picture is stable, but fiscal arithmetic remains demanding. Tinubu’s 2026 spending plan is N58.18tn, with a deficit of N23.85tn, equal to 4.28 percent of GDP. That is a substantial financing requirement in a domestic market where credit is already costly and private sector demand for capital is rising.
The financing choice helps and hurts at the same time. Domestic borrowing reduces direct external FX risk, but it can crowd out private credit if rates stay high. Edun has been explicit about changing the borrowing mix.
At the Nigerian Economic Summit in October 2025, he said the government would make “greater use of sukuk, green bonds and diaspora bonds instead of eurobonds”, a strategy aimed at lowering cost and lengthening maturity.
The logic is sound. Rollover risk does not disappear, but it can be reshaped into longer tenors with more predictable refinancing windows.
*Inflation and disinflation are possible, but they are not automatic*
Inflation remains the most contested variable in any Nigerian outlook. The CBN’s projections are optimistic, but inflation outcomes in Nigeria are not purely demand-led.
They are corridor-led. Food inflation is vulnerable to insecurity in farming belts, transport bottlenecks, imported input pass-through, and energy repricing. One weak harvest can reprice the basket and reset expectations.
Edun has tried to keep the narrative anchored in fiscal discipline and supply-side logic. In October 2025, he said the “fight against inflation started with the fiscal authorities”, and that the government would prioritise spending toward productivity-enhancing sectors.
Investors will welcome that framing, because inflation in Nigeria is as much about supply constraints as it is about monetary stance.
*Oil, less dominant, is still determinant*
Nigeria is less oil dependent than it was, but oil still underwrites FX liquidity and confidence. The budget assumes production of 1.84m barrels per day and oil prices at $64.85, while the CBN baseline is more conservative on price and output.
This gap matters. If oil disappoints, reserve accumulation slows, FX liquidity tightens, and reform credibility is tested in real time.
*Politics of reform, fiscal space, and the distribution question*
Macro stabilisation does not carry itself politically. When households feel squeezed, reform coalitions thin. Edun has emphasised that subsidy removal and FX reforms created fiscal room and improved federation revenue flows.
At the summit in October 2025, he said the two reforms had “freed five percent of GDP into Federation Account distribution”, and that allocations to states had increased significantly.
He has made the same point in a World Bank panel context, arguing that funds now flow to the federation account and deductions have been reduced, improving transparency and development financing capacity.
He has also framed the scale of the subsidy burden in hard numbers. In late 2024, he said subsidy removal and market-based FX pricing saved about $20bn, on the premise that the combined subsidy burden was about five percent of GDP.
Whether one accepts the exact arithmetic or not, the political point is clear: reforms created a pool of resources that must now show up in roads, power, human capital, and credible safety nets.
*Investment implication: investable, but not risk-free*
Nigeria in 2026 looks more stable, but it is not fully de-risked. The best risk-adjusted opportunities are still those with defensible cash flows and policy alignment: export-linked supply chains, domestic gas and power services, logistics and storage, and financial infrastructure that benefits from transparent FX pricing.
Risks remain familiar: inflation relapse, oil disappointment, fiscal slippage, policy reversals under pressure, and credit deterioration from imported input cost shocks.
Stability may be arriving. The task now is to widen the narrow ledge into a durable platform for private capital.
Opeyele Funmi, Senior Economist at BAC finance writes from Lagos
