Nigeria’s central bank is projecting a stronger economic expansion in 2026, explicitly counting increased fiscal and pre-election spending as a factor expected to boost growth.
The bank however warned that higher-than-anticipated election-related outlays could threaten inflation and fiscal stability.
In its 2026 macroeconomic outlook, the Central Bank of Nigeria (CBN) said economic growth is expected to accelerate to 4.49 per cent in 2026, up from an estimated 3.89 per cent in 2025, driven by structural reforms, improved exchange-rate stability, rising private-sector investment and expansionary government spending ahead of the 2027 general elections.
The forecast marks a notable framing shift, with the top bank identifying election-related spending not only as a macroeconomic variable to monitor, but as a contributor to aggregate demand and output growth.
“Growth in monetary aggregates in 2026 is expected to be influenced majorly by exchange rate movement, fiscal operations, the impact of election-related spending, and continued implementation of prudential measures,” the CBN said.
According to the bank, increased fiscal and pre-election spending is expected to stimulate domestic demand, while improved coordination between monetary and fiscal policy could help stabilise the exchange rate, support job creation and ease inflationary pressures in the near term.
The outlook assumes that these dynamics will unfold alongside an easing monetary policy stance, which the CBN expects to lower borrowing costs and further support economic activity.
Beyond fiscal spending, the central bank identified private-sector investment, particularly output from the Dangote refinery, as a key growth driver. It also expects higher crude oil production, improved security around oil and gas infrastructure, and expanded domestic refining capacity to lift output in 2026.
Domestic crude oil production is assumed at 1.50 million barrels per day, excluding condensates, while PMS prices are projected to hover around ₦950 per litre in 2026. Oil prices are forecast at an average of $55 per barrel in 2026, reflecting expectations of rising global inventories and a supply glut.
The exchange rate outlook is similarly optimistic, with the naira projected to average ₦1,400 to the dollar in 2026, supported by a more efficient FX market, higher capital inflows and a current account surplus.
Bullish Market and Risks
The CBN also expects the capital market to remain bullish, underpinned by the ongoing bank recapitalisation exercise, improved investor confidence and policy measures such as zero capital gains tax for small businesses and exemptions for retail investors.
Inflation is projected to continue its downward trajectory, with headline inflation expected to decelerate sharply to 12.94 per cent in 2026, from an estimated 21.26 per cent in 2025. The moderation is expected to be driven by declining food prices, easing PMS costs and improved security in food-producing regions.
However, the central bank acknowledged that its outlook is contingent on a set of assumptions that have historically proven difficult to sustain during election cycles.
While the fiscal outlook is described as broadly positive, the CBN warned that elevated debt service obligations, extra-budgetary spending and a potential rise in statutory transfers linked to pre-election spending could constrain fiscal space.
More pointedly, it cautioned that higher-than-expected election spending and off-budget outlays pose a downside risk to the inflation outlook for 2026, even as the bank projects a broad-based disinflation trend.
The forecast also assumes strict adherence to the 2025–2027 Medium Term Expenditure Framework (MTEF) and effective coordination between fiscal and monetary authorities – conditions that analysts note have often weakened in the run-up to elections.
Unanticipated shocks in the global economy, a sharper-than-expected fall in oil prices or disruptions to crude production could further undermine revenue assumptions and investor confidence, the CBN said.
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