The Central Bank of Nigeria (CBN) has this month released its Macroeconomic outlook for Nigeria, 2026 and included some features that greatly add to its value. The section on the global outlook is mercifully kept short and relevant. The outlook is good at underpinning the forecasts: rather than say that growth will pick up ‘because demand will strengthen’ or some other tautology, it highlights specific reforms such as the Nigeria Tax Act, 2025 or the launch of the federal treasury e-receipts as likely drivers of the growth. Another positive is the corporate-style risk register at the back of the outlook.
The underlying assumptions behind the baseline scenario for 2026 are: an average crude oil price of USD55/b; average crude oil production excluding condensates of 1.50 mbpd; and an average exchange rate on the Nigerian foreign exchange market (NFEM) of N1,400 per US dollar. A further assumption is a monetary policy rate of 27.0 percent, the current level, although it is not said explicitly that this would be the rate at end-year. (Nor could it, given the autonomy of the monetary policy committee.) The price of premium motor spirit (PMS) is expected to “hover” around N950 per litre.
The outlook has GDP growth at 4.5 percent this year. There is little point in comparing with previous years due to the new statistical series (base year 2019). However, when we look at income per head, it is significant that the UN Population Fund has scaled back its demographic growth projections for many countries in its latest survey, including Nigeria’s to 2.1 percent per year. We should add that the outlook has an “optimistic” growth forecast for the economy this year of 8.0 percent.
Average inflation is forecast to slow from an estimated 21.3 percent last year to 12.9 percent. We happily buy into the argument that a tight monetary stance, exchange-rate stability (appreciation, currently) and the start of domestic refining last year at the Dangote complex have contributed to disinflation. We are not so sure, however, that slowing food price inflation is set to continue. Insecurity in food growing areas due to demographic pressure, not forgetting climate change, can rapidly reverse the current trend.
The outlook states the commitment of the CBN to an inflation targeting framework. As an initial step and to enhance the credibility of the exercise, the CBN has set what it terms “transitional inflation targets”. It was wisely allowed for quite a bit of slippage in the numbers: so for this year it has a target of +/- 16.5 percent (compared to the forecast of 12.9 percent, and for 2027 a target of 13.0 percent (10.8 per cent). The aim is to manage expectations among stakeholders. The statement of intent is to be praised: we would add, however, that the size of the informal economy and the remaining tensions between monetary and fiscal policy would make the next step to a permanent framework a challenge at present.
It is worth noting that the debate on monetary policy in think-tanks and universities in advanced economies has tentatively started to question the merit of inflation targeting.
To highlight three unconnected yet revealing points in the outlook, we note that: the fiscal outlook sensibly makes allowances for the impact of the next elections on spending; the projected FGN deficit for this year, when rounded to one decimal place, meets the ceiling in the fiscal responsibility legislation of not more than 3.0 percent of GDP; and the document sees public-private partnerships (PPPs) as one means to tackling the infrastructure deficit without cautioning that governments must ensure that the private party does not enjoy only the upside.
Another strength of the outlook is that it is practical and barely strays into the “vision thing”. Practical could be viewed by some as boring. In contrast, we see a succinct, well-written outlook with near-term objectives. The baseline growth forecast is manageable barring unexpected shocks and, like the other projections, is supported by reforms and trends in progress and not by platitudes.
Having read many policy papers and macroeconomic outlooks over many years, we conclude that this document scores well. Rather than being an exercise in box-ticking, i.e., a public relations exercise, it leaves us all better informed. It is clear where the CBN is going under the governorship of Cardoso. The bank’s reputation has dramatically improved over the past two years, for which we need to look further than Nigeria’s removal from the grey list of the Financial Action Task Force (FATF) in October.
The monetary authorities had to show the political will to align with the necessary requirements. The CBN and the FGN demonstrated that will: their counterparts in Kenya, for example, did not and the country remains on the grey list.
