NIGERIA’S economy is projected to expand by 4.49 per cent in 2026, reflecting sustained gains from ongoing reforms. However, concerns remain over the 70 per cent budget carryover of capital projects from 2025.
Already, President Bola Ahmed Tinubu has assured that the economic policies and reforms of his government would positively impact more households in 2026, noting that the government would build on the gains of such reforms within the year.
He cited easing inflation, stronger foreign reserves and renewed investor confidence as evidence that his administration’s reforms were beginning to yield results, adding that Nigeria “is entering a more robust phase of economic growth in the new year.”
Conversely, there are doubts that the economic projections and optimism shared by the Tinubu-led administration would not materialise as it struggles to fund the budget, despite accruing more money from oil sales, fuel subsidy removal, and appreciations in non-oil revenue, economic watchers say.
Funding the capital component of the federal budget impacts roads, rural economy and other critical infrastructure that affects average Nigerian.
In 2025, the Minister of Finance, Wale Edun, admitted the government realised just N10 trillion out of the N40 trillion revenue target for the 2025 fiscal year.
The development led to the Senate asking questions about persistent borrowing, overlapping budgets and weak capital project execution by the government.
“States and the Federal Government are getting richer from federation allocation since the removal of fuel subsidy. Has that reflected in the lives of the people?”, a development economist and public sector analyst, Celestine Okeke, queried.
He stressed the importance of funding the capital component of the national budget, which has a direct impact on the lives of an average Nigerian and economic development.
“Look at key critical roads across the country. You could see many people sleeping on the road this festive period because of abandoned and dilapidated road projects. This is the consequence of not cashing back projects in the budget,” Okeke said.
In his submission, the Chief Executive Officer of Economic Associates, Ayo Teriba, said the revenue gaps remained a worry in funding the national budget unless the government finds a way to attract more capital into the economy and reduce borrowings.
“The government must unlock opportunities in private capital and attract more investments. We have over 200 million market size, which can support the bottom of the pyramid and attract more investments into the economy,” he stated.
He advocated the importance of listing the Nigerian National Petroleum Company in the stock market and finding ways of making money from several government assets through securitisation.
Despite the concerns raised by economic watchers, the Central Bank of Nigeria (CBN) expressed cautious optimism on projected 4.49 per cent economic growth, as it hopes on structural changes in the oil sector, tax reforms and the foreign exchange market to sustain growth and disinflation.
What Central Bank 2026 economic outlook say
The CBN touted stronger private sector investment and improved macroeconomic stability as key drivers of the projected 4.49 per cent growth in 2026.
The apex bank disclosed this in its 2026 Macroeconomic Outlook for Nigeria, published on its website on Tuesday, December 30, noting that the projected growth compared with an estimated 3.89 per cent expansion in 2025.
“Importantly, the outlook is contingent on the implementation of well-sequenced, consistent fiscal and monetary policies. The fiscal policy stance is hinged on the full implementation of the 2025–2027 Medium Term Expenditure Framework (MTEF), which is expected to stimulate domestic consumption and investments, and drive aggregate demand and employment in the medium term,” the CBN said.
According to the apex bank, growth prospects for 2026 remain positive, supported by continued gains from broad-based structural reforms by the government. These reforms, it said, had helped to improve the business environment, boost capital inflows, raise government revenue, and enhance stability in the foreign exchange market.
The CBN explained that its easing monetary policy stance was expected to further support economic expansion, as anticipated reductions in lending rates lower borrowing costs and improve access to credit for businesses and households.
Increased private sector investment, particularly from large-scale projects such as the Dangote Refinery, is also expected to significantly brighten the growth outlook in 2026.
In addition, higher crude oil production, underpinned by improved security around oil assets, is expected to support output growth. The bank highlighted the role of enhanced surveillance and monitoring, especially following the launch of the Production Monitoring Command Centre (PMCC), as well as the expansion of domestic crude oil refining capacity and relatively stable energy prices.
The outlook also reflects expectations of increased fiscal spending, including pre-election expenditure, which could further stimulate aggregate demand. The CBN said effective coordination between monetary and fiscal policies, aimed at sustaining exchange rate stability, job creation and inflation control, would provide additional impetus to overall output growth.
However, the bank cautioned that several downside risks could weigh on the economic outlook in 2026. It noted that if the projected deceleration in inflation is not achieved, monetary policy easing could be reversed, thereby dampening growth prospects.
While ongoing reforms are expected to raise productivity, stimulate private sector activity, and support a more diversified and competitive economy, the CBN warned that the pace of improvement could be constrained by persistently high costs of doing business, poor infrastructure, and insecurity, all of which could undermine business operations.
Expected risk factors from CBN’s projections
The apex bank also highlighted the risk that cost-cutting measures by firms could increase unemployment, further shrink the formal sector, and ultimately constrain economic growth. In addition, unfavourable climatic conditions could result in crop losses, disruptions to businesses and transportation services, and weaker overall economic activity.
Negative shocks to crude oil production remain another key risk. The CBN said unanticipated security breaches around oil installations or force majeure events could reduce oil output below projections, thereby constraining growth.
The baseline projections are anchored on several key assumptions, including an average crude oil price of $60 per barrel in the fourth quarter of 2025 and $55 per barrel in 2026.
This is consistent with the US Energy Information Administration’s outlook that rising global crude oil inventories and supply glut would moderate oil prices.
The outlook also assumes an average Nigerian Foreign Exchange Market (NFEM) exchange rate of N1,451.63 per $1 in the fourth quarter of 2025 and N1,400 per $1 in 2026, supported by improved FX market efficiency, higher capital inflows, a current account surplus and broad-based economic recovery.
Petrol pump price will hover around N950 per litre in 2026
Domestic crude oil production is assumed at about 1.50 million barrels per day, excluding condensates, throughout the forecast period. Petrol pump prices are expected to hover around N950 per litre in 2026.
Government expenditure is projected to align with the 2025–2027 MTEF and Fiscal Strategy Paper, reflecting an expansionary fiscal stance aimed at supporting the $1 trillion economy initiative. The Monetary Policy Rate (MPR) and Cash Reserve Ratio (CRR) are assumed at 27.00 per cent and 45.00 per cent, respectively.
The CBN said the baseline projections were supported by assumptions of improving business confidence and stronger investor sentiment, alongside higher crude oil production, increased investments, enhanced security around oil and gas infrastructure, and rising activity in the midstream segment of the oil industry, particularly domestic refining.
Sectoral performance is also expected to support growth. The mining and quarrying subsector is projected to continue benefiting from reforms aimed at improving efficiency and the business environment. The services sector is expected to remain a key driver of growth, with transport, particularly road and rail, and wholesale and retail trade sustaining momentum.
The information and communication technology subsector is also projected to benefit from increased investments in 5G coverage, improved internet connectivity and accelerated nationwide digital transformation. Similarly, the real estate subsector is expected to support higher economic activity in 2026, driven by sustained government support, growing mortgage financing, and continued demand for housing.
On inflation, the CBN projected a continued downward trend in 2026, supported by stability in the foreign exchange and energy markets, the lagged effects of previous interest rate hikes, and improved policy coordination.
Headline inflation is projected to decelerate to 12.94 per cent in 2026 from an estimated 21.26 per cent in 2025. The anticipated moderation, according to the bank, would be driven mainly by declining food prices and lower petrol prices, with increased competition in the midstream segment of the oil industry expected to ease PMS costs.
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.