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| The CBN forcast stronger economic Growth, easing inflation, and a rise in external Reserve to $51 billion in 2026 amid ongoing Reforms. |
The Central Bank of Nigeria (CBN) has painted a cautiously optimistic picture of the country’s economic future, projecting stronger growth, lower inflation, and a healthier external reserve position in 2026. According to the apex bank, Nigeria’s Gross Domestic Product (GDP) is expected to expand by 4.49 percent, while external reserves could rise to about $51.04 billion, reflecting the impact of ongoing reforms, improved oil sector performance, and easing monetary conditions. In its Macroeconomic Outlook for Nigeria in 2026, the CBN described the projections as a “realistic window of opportunity” to consolidate recent gains and move the economy towards sustained macroeconomic stability. The bank acknowledged lingering global and domestic challenges but expressed confidence that coordinated monetary, fiscal, and structural reforms could support inclusive, private-sector-led growth.
Global Economic Environment and Nigeria’s 2025 Performance
The CBN’s projections are set against a mixed global economic backdrop. According to the bank, global economic growth slowed slightly to an estimated 3.20 percent in 2025, down from 3.30 percent in 2024. This moderation was largely attributed to persistent trade tensions, geopolitical uncertainties, and weaker demand in some advanced and emerging economies. On the positive side, global inflation eased to about 4.20 percent in 2025, supported by declining energy prices, improved supply chains, and a gradual shift by major central banks toward less restrictive monetary policies. Financial conditions also improved, as easing interest rates and renewed investor confidence boosted capital flows across global markets. Within this global context, Nigeria’s economy recorded a stronger performance in 2025. The CBN estimates that Nigeria’s GDP will grow by 3.89 percent in 2025, compared with 3.38 percent in 2024. This improvement, the bank said, reflected gains across both the oil and non-oil sectors, highlighting the positive impact of domestic reforms and a gradual recovery in productive activities.
Inflation Trends and Monetary Policy Developments
Inflation remained a major concern in 2025, although pressures moderated compared to earlier periods. The CBN attributed the improvement partly to the rebasing of the Consumer Price Index (CPI) by the National Bureau of Statistics, which provided a more accurate picture of price movements in the economy. Headline inflation, which stood at 24.48 percent in January 2025, eased to an estimated average of 21.26 percent by year-end. According to the CBN, this moderation was driven by a tight monetary policy stance, relative stability in the foreign exchange market, and improved coordination between monetary and fiscal authorities. In the financial sector, monetary aggregates expanded at a slower pace in 2025, reflecting higher interest rates and tight liquidity conditions. However, the CBN adjusted its policy stance in September 2025, easing monetary conditions slightly to support domestic growth and investment. This shift signalled a careful balancing act between controlling inflation and stimulating economic activity. The banking sector remained broadly stable throughout the year. Key financial soundness indicators stayed within regulatory benchmarks, supported by effective supervision, macroprudential measures, and ongoing efforts by the CBN to strengthen the resilience of financial institutions.
Fiscal Position and Debt Sustainability
Nigeria’s fiscal position also showed signs of improvement in 2025. The CBN noted that fiscal space expanded, supported by institutional reforms, relatively stable crude oil prices, and improvements in domestic oil production. As of end-June 2025, Nigeria’s total public debt stood at 33.98 percent of GDP, a level the bank described as within generally acceptable thresholds. Domestic debt accounted for 52.86 percent, while external debt made up 47.14 percent of the total debt stock. The CBN emphasized that while debt levels remain manageable, sustained discipline in borrowing and improved revenue mobilization are critical to maintaining fiscal sustainability over the medium term.
Stronger External Sector Performance
Nigeria’s external sector recorded notable gains in 2025. The balance of payments posted a surplus of about $5.80 billion, reflecting stronger export earnings, increased capital inflows, and improved domestic refining capacity. External reserves rose significantly to approximately $45.01 billion in 2025, up from $40.19 billion in 2024. The CBN attributed this increase to higher portfolio investment inflows, better export receipts, and reforms in the foreign exchange market that improved transparency and investor confidence. The relative stability of the naira during the period was supported by market-oriented foreign exchange policies and stronger inflows from exporters, remittances, and foreign investors.
2026 Economic Outlook: Growth, Inflation, and Investment
Looking ahead, the CBN projects that Nigeria’s economy will grow by 4.49 percent in 2026, driven by continued structural reforms and a gradually easing monetary policy stance. According to the bank, these factors are expected to improve the business environment, boost investor confidence, and support private-sector-led growth. The oil sector is expected to play a key role in sustaining growth momentum, supported by improved security in oil-producing areas, higher production levels, and increased investment in domestic refining capacity. Non-oil sectors such as manufacturing, agriculture, and services are also expected to benefit from reforms aimed at reducing structural bottlenecks.
On inflation, the outlook is significantly more optimistic. The CBN projects that headline inflation will moderate sharply to an average of about 12.94 percent in 2026. This expected decline is linked to easing food prices, lower premium motor spirit (PMS) costs, and improved supply conditions across key sectors of the economy. The bank expressed confidence that sustained reforms and stable macroeconomic policies would help anchor inflation expectations and reduce price volatility.
Capital Markets, Liquidity, and Financial Sector Outlook
In 2026, growth in monetary aggregates is expected to be influenced by several factors, including exchange rate movements, fiscal operations, election-related spending, and the continued implementation of prudential measures. The CBN expects the capital market to remain bullish, supported by the ongoing bank recapitalization exercise, rising investor confidence, and policy measures aimed at deepening the financial market. Increased market activity is expected to enhance access to long-term financing for businesses and support economic expansion.
Fiscal Projections and Debt Outlook for 2026
The fiscal outlook for 2026 is described as optimistic but challenging. The CBN projects that federal government retained revenue will rise to ₦35.51 trillion, while total expenditure is expected to reach ₦47.64 trillion. This would result in a provisional fiscal deficit of about ₦12.14 trillion, equivalent to approximately 3.01 percent of GDP. To finance this gap, the government is expected to rely on a combination of domestic and external borrowing. As a result, public debt is projected to rise modestly to about 34.68 percent of GDP by end-2026, up from 33.98 percent in mid-2025. The CBN stressed that it is crucial for borrowing decisions to remain aligned with fiscal rules to ensure long-term debt sustainability.
External Position and Foreign Reserves Outlook
Nigeria’s external position is expected to strengthen further in 2026. The current account surplus is projected to rise sharply to $18.81 billion, supported by strong export growth, steady remittance inflows, increased oil and gas output, and higher global demand from key trading partners. Portfolio investment inflows and external borrowings are expected to keep the financial account in a net borrowing position of about $10.15 billion. Meanwhile, Nigeria’s International Investment Position is projected to record a net borrowing position of $69.58 billion, reflecting increased capital inflows driven by relatively attractive yields. Crucially, external reserves are projected to rise to $51.04 billion in 2026, providing a stronger buffer against external shocks and enhancing confidence in Nigeria’s foreign exchange market.
Key Risks to Nigeria’s Economic Outlook
Despite the optimistic projections, the CBN warned that Nigeria’s economic outlook remains vulnerable to several risks. A major concern is the possibility of renewed inflationary pressures, particularly if fiscal spending exceeds benchmarks or if global financial conditions tighten unexpectedly, leading to capital outflows and exchange rate volatility. Economic growth could also be threatened if inflation fails to decelerate as projected, forcing the CBN to reintroduce tighter monetary policies. Other downside risks include adverse weather conditions, disruptions to crude oil production, and persistent security challenges, which could undermine output growth and budget implementation. The bank also highlighted geopolitical tensions and protectionist trade policies as potential threats to Nigeria’s trade balance and external stability. Within the financial sector, a sharp rise in non-performing loans or concentration risks linked to the bank recapitalization process could strain balance sheets and dampen investor appetite.
Policy Commitment and Way Forward
In response to these risks, the CBN reaffirmed its commitment to balancing price stability with economic growth in 2026. The bank pledged to deploy appropriate monetary and macroprudential tools to attract foreign investment, stabilize the foreign exchange market, and strengthen financial system resilience. It also announced plans to deepen the implementation of the Global Standing Instruction framework, enhance credit discipline, and strengthen cybersecurity regulations across the banking system. On the fiscal side, the CBN underscored the importance of broadening the tax base and ensuring effective implementation of the Nigeria Tax Act, 2025, while keeping borrowing within sustainable limits.
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Conclusion
Overall, the CBN believes that 2026 presents a critical opportunity for Nigeria to consolidate recent gains, stabilize its macroeconomic environment, and place the economy on a firmer path of inclusive and sustainable growth. While risks remain, the bank maintained that with disciplined policy implementation, strong institutional coordination, and effective management of emerging challenges, Nigeria can achieve its growth, inflation, and external reserve targets and build a more resilient economy for the future.
By PrimeLineInfo
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