The Nigerian economy enters 2026 on firmer footing than it has enjoyed in years. The stabilisation efforts of 2025 have begun to yield tangible results. The macroeconomic environment is more predictable, inflation is retreating, and the naira has found stability. With a robust infrastructure push on the horizon, the outlook for 2026 is cautiously optimistic.
The Gains of 2025
According to the National Bureau of Statistics, the economy expanded by 3.98 per cent in the third quarter of 2025, up from 3.86 per cent in the corresponding period of 2024. The World Bank projects full-year 2025 growth at around 4.2 per cent, while the IMF estimates 3.9 per cent.
The turnaround was broad-based. Oil production recovered to an average of 1.64 million barrels per day in the third quarter, the highest since 2020. The non-oil sector, accounting for over 96 per cent of GDP, grew by 3.91 per cent, driven by services, agriculture, and construction.
Inflation moderated for eight consecutive months through November 2025. This reflected both the NBS rebasing of the Consumer Price Index and genuine disinflation supported by the Central Bank’s tight monetary stance, improved harvests, and naira stability. By December, headline inflation stood at 15.15 per cent. The policy rate was held at 27.5 per cent for most of the year before a 50 basis point cut to 27 per cent in September.
The naira appreciated by roughly 7 per cent against the dollar, closing the year at approximately N1,436 per dollar. External reserves rose to between $45 billion and $47 billion by year end, up from $40.9 billion at the start of 2025.
Fiscal Reforms
The Tax Reform Acts, now in force from January 2026, provide a more coherent fiscal framework. By broadening the tax base, improving collection efficiency, and rationalising overlapping levies, the reforms should enhance government revenue over time. Nigeria’s tax-to-GDP ratio remains among the lowest globally. If implementation is effective, governments at all levels will have more resources for development priorities.
Infrastructure Spending and the Multiplier Effect
The 2026 budget, at N58.18 trillion, is the largest in Nigeria’s history. Capital expenditure is projected at N26.08 trillion. Infrastructure receives N3.56 trillion. Education and health are allocated N3.52 trillion and N2.48 trillion respectively. Debt service stands at N15.52 trillion. The projected deficit of N23.85 trillion represents 4.28 per cent of GDP.
The emphasis on capital spending is significant. Infrastructure investment reduces the cost of doing business, expands market access, and lowers logistics expenses. These supply-side improvements ripple through the economy.
The fiscal multiplier captures this dynamic. A naira spent on infrastructure generates additional rounds of spending as contractors pay workers, workers purchase goods, and suppliers expand operations. Empirical work in developing economies often finds multipliers above 1 for well-executed capital projects, though results vary by country and financing conditions.
Moreover, public infrastructure spending tends to crowd in private investment rather than crowd it out. The Lekki-Epe corridor illustrates this: the expressway and free trade zone attracted the Dangote Refinery, Alaro City, and the Lekki Deep Sea Port. Along the Lagos-Ibadan Expressway, the ongoing reconstruction has drawn investments from Nestle, Olam, Honeywell, and dozens of other manufacturers who have built plants and warehouses along the route.
The critical question is execution. Nigeria’s historical capital budget implementation has often fallen well short of appropriated amounts. The growth dividend from this budget depends on actual disbursement and delivery.
2026: A Pre-Election Year
Nigeria holds its next general elections in 2027, making 2026 a pre-election year. Pre-election periods have historically been associated with increased government spending. The additional demand stimulus can support growth, but fiscal expansion financed through borrowing can generate inflationary pressures if not carefully managed. With debt service consuming a large share of revenue and the deficit near the statutory ceiling, room for discretionary spending is limited. Still, the likely outcome is heightened economic activity, particularly in construction and services.
The Growth Outlook
Growth projections for 2026 range from 4.0 to 4.7 per cent across major institutions, with the CBN at 4.49 per cent, the IMF and World Bank at 4.4 per cent, and the Federal Government at 4.68 per cent. Realising the upper end will require improved oil production, better capital budget implementation, continued disinflation, and supportive external conditions.
The services sector, accounting for over 53 per cent of GDP, will continue to anchor growth. Foreign investment more than doubled in the first half of 2025 compared to 2024, driven largely by portfolio inflows. FDI remains modest, but reforms have improved Nigeria’s international standing. The country exited the FATF grey list in October 2025, and rating agencies upgraded their assessments.
Risks
Global oil prices are expected to remain volatile, with some forecasts suggesting averages below $60 per barrel. Price declines would strain fiscal and external balances. On the domestic front, the government has committed N5.41 trillion to defence and security, signalling determination to create a more stable environment for economic activity. Execution risk remains the most significant uncertainty. If capital budget releases disappoint, growth could come in below projections.
Conclusion
Nigeria enters 2026 in a stronger position than it has occupied for some time. Inflation is declining. The exchange rate is stable. Reserves have recovered. The tax reforms create potential for a more sustainable fiscal framework. The infrastructure push, if well executed, should unlock productivity gains and trigger multiplier effects across the economy. Growth projections cluster between 4.0 and 4.5 per cent. The foundation is being laid. The challenge now is execution.
Dr Tope Fasoranti is an Economist, Banker, and Enterprise Transformation Strategist
