Outlook: Analysts predict growth recovery as Nigeria eyes 2026 upswing

Onome Amuge

2026 could mark a turning point for Nigeria’s economy as the country gradually transitions from stabilisation toward growth. Analysts point to disciplined monetary policy, reforms in the exchange rate, and renewed activity in both oil and non-oil sectors as key drivers, forecasting GDP expansion of 4 to 4.5 per cent. Yet, fiscal pressures, debt servicing, and political uncertainties are considered key variables to test the durability of this recovery.

According to projections released by the Central Bank of Nigeria (CBN), the economy is expected to expand by 4.49 per cent in 2026, up from an estimated 3.89 per cent in 2025 and 3.38 per cent in 2024. Inflation is projected to moderate to 12.94 per cent, marking a continuation of the downward trend that saw headline inflation decline from 24.48 per cent at the start of 2025 to 14.45 per cent by November, driven largely by stabilisation in the naira and improved domestic supply conditions.

Macroeconomic context and global comparisons

Nigeria’s projected growth rate places it among the faster-growing economies in sub-Saharan Africa, outpacing the IMF’s forecast of just over 3 per cent global growth in 2026. The country’s growth outlook reflects expectations of stronger performance in both the oil and non-oil sectors, underpinned by policy consistency, investor confidence, and a cautiously optimistic international environment. While global economic conditions remain moderate, analysts say Nigeria’s relative performance will be supported by stabilised currency markets, a predictable policy environment, and continued structural reforms aimed at reducing bottlenecks in key sectors.

Oil production is assumed to average approximately 1.5 million barrels per day, with a benchmark price of $55 per barrel. These conservative assumptions are designed to manage fiscal risk while limiting vulnerability to external price shocks. Oil revenues remain central to government finances and foreign exchange inflows, making output stability a key determinant of broader economic performance. Analysts note, however, that the ongoing integration of the Dangote Refinery into domestic fuel supply chains could materially reduce recurrent demand for imported petroleum products, shifting Nigeria’s energy profile and easing FX pressures in 2026.

Non-oil sector as growth engine

Beyond hydrocarbons, the non-oil economy is expected to remain the primary driver of expansion. Sectors such as services, trade, manufacturing, and agriculture are projected to support growth, aided by reforms targeting the business environment, foreign exchange market liberalisation, and revenue mobilisation. The services sector alone accounted for 53 per cent of GDP by Q3 2025, with telecommunications, financial services, trade, construction, and real estate contributing most heavily. Agriculture, contributing over 31 per cent of GDP, grew 3.79 per cent in 2025, although productivity and insecurity challenges remain. Manufacturing growth remained slow at 1.25 per cent due to power deficits, high logistics costs, and limited access to finance. Analysts project that these constraints will ease gradually in 2026, supporting stronger overall performance.

Monetary policy and inflation outlook

Monetary policy remains central to Nigeria’s stabilisation and growth strategy. The CBN maintained a tight stance throughout 2025, keeping the monetary policy rate at 27 per cent and deploying complementary tools to manage liquidity and anchor inflation expectations. Adjustments to deposit and lending facilities were designed to reinforce monetary transmission while avoiding disruption to financial markets.

Looking ahead, the CBN has signalled a shift toward a clearer inflation-targeting framework, improving policy transparency, and aligning its operations more closely with global central banking standards. Analysts argue that this institutional recalibration is critical for sustaining investor confidence, ensuring rule-based policy execution, and supporting long-term price stability.

Headline inflation is expected to average 12.94 per cent in 2026, with food inflation, the historical driver of Nigeria’s consumer price pressures, forecast to moderate as logistics improve and domestic production stabilises. While still elevated relative to global benchmarks, this trajectory is interpreted as a tangible step toward macroeconomic normalisation.

External position and exchange-rate stability

Nigeria’s external buffers are projected to strengthen in 2026. The CBN expects foreign reserves to reach $51.04 billion, up from $45 billion in 2025, supported by rising export receipts, remittance inflows, and tighter external balance management. Concurrently, the current account is projected to post a surplus of approximately $18.81 billion, reinforcing stability in the naira and providing a buffer against global shocks.

Policy analysts highlight that the improved external position is essential not only for exchange-rate stability but also for rebuilding confidence among foreign investors and trading partners. These developments, coupled with the unification and liberalisation of the FX system, are expected to create a more predictable operating environment for businesses reliant on imports and reduce fiscal pressure associated with foreign currency obligations.

Fiscal pressures and debt dynamics

Despite encouraging macroeconomic trends, fiscal pressures remain a key vulnerability. The federal budget for 2026 is projected at N12.14 trillion, equivalent to roughly 3.01 per cent of GDP, with financing primarily sourced from domestic borrowing. Debt servicing continues to absorb a substantial portion of revenue, although Nigeria’s public debt-to-GDP ratio remains below the sub-Saharan African average. Analysts warn that high debt service obligations, combined with a rigid expenditure profile, including the cost of the new minimum wage and pre-election spending pressures,could constrain fiscal flexibility.

Pre-election economic pressures

The 2027 general elections are expected to exert significant influence on the 2026 political economy. Analysts note that subnational governments, which benefit from enhanced revenue allocations under the new Tax Act, may wield disproportionate influence over local spending decisions. Political consolidation and electoral considerations could constrain radical reform at the federal level, shaping policy execution and budgetary priorities.

Key fiscal developments include the implementation of Section 203 of the Nigeria Tax Act 2025, effective January 1, 2026, which introduces a restructured VAT distribution, new levies, and taxation of virtual assets. These measures are expected to reshape state-federal fiscal dynamics and generate additional revenue streams while introducing new compliance costs for corporations.

Banking sector recapitalisation

The banking sector is entering 2026 under heightened scrutiny, following the CBN’s imposition of new minimum capital requirements to be met by March 2026. Analysts note that late 2025 saw significant capital-raising activity, including rights issues and hybrid share offers, as banks raced to meet regulatory thresholds. This use-or-lose dynamic is expected to drive consolidation, mergers, and acquisitions, shaping the sector’s competitive landscape and influencing credit availability in the real economy.

Independent research by Veriv Africa projects three plausible macroeconomic scenarios for Nigeria in 2026.

Base case: Assuming stable monetary policy, inflation around 16 per cent, and the naira trading at N1,440–N1,465/$, GDP growth is projected at 3.56 per cent, with inflation stabilising at 16.33 per cent.

Worst case: A rise in inflation to 26 per cent, combined with a parallel market naira rate of N1,745/$ and MPR at 28.5 per cent, could depress GDP growth to 2.86 per cent while exacerbating fiscal and exchange-rate pressures.

Best case: Sustained moderation in inflation to 14 per cent, coupled with monetary easing, naira appreciation to N1,300/$, and strong non-oil sector performance, could lift GDP growth to 4.63 per cent, with inflation easing to 14.27 per cent. Analysts highlight that this scenario hinges on continued reform momentum, improved energy self-sufficiency through the Dangote Refinery, and effective policy coordination.

Structural reforms and investment outlook

Observers highlight several structural developments expected to support growth in 2026. The Dangote Refinery, now fully integrated into domestic fuel supply chains, reduces dependence on imports and lowers FX demand, while also catalysing credit expansion and logistics improvements. Reforms in fiscal federalism, tax administration, and exchange-rate management are expected to strengthen investor confidence, support private sector growth, and deepen capital markets liquidity.

Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), notes that reform momentum sustained through 2025 positions Nigeria to move from stabilisation to growth. “If security challenges are addressed and policy credibility maintained, 2026 could mark the beginning of a more robust growth phase, with tangible improvements in living standards,” he said.

Risks and headwinds

Despite the broadly positive outlook, analysts caution that several downside risks persist. These include persistent insecurity affecting agriculture and logistics, oil price and production volatility, structural bottlenecks in power and transportation, high debt service obligations, pre-election fiscal pressures, and external geopolitical tensions affecting trade and investment. Pushback against new tax reforms and delayed submission of the Medium-Term Expenditure Framework could also undermine fiscal credibility.