January 12, 2026/CSL Report
Nigeria enters 2026 with macroeconomic conditions gradually stabilising, even as deep structural, social, and political challenges persist. Economic growth is expected to strengthen to around 4.2%, driven primarily by resilience in the non‑oil sector, particularly services, ICT, trade, and agriculture. A more stable exchange rate, easing inflationary pressures, and a cautiously accommodative monetary policy stance are expected to provide a more supportive operating environment for businesses and households.
Inflation is projected to continue moderating in 2026, averaging around 17%-18%, supported by exchange rate stability, easing food prices, improved domestic refining capacity, and a sober global oil price environment. While short‑term statistical distortions from CPI rebasing may temporarily inflate headline readings, underlying disinflationary momentum remains intact. This should allow the Central Bank of Nigeria to resume a measured easing cycle, with cumulative rate cuts of up to 300 basis points over the year, albeit constrained by external risks and potential fiscal slippages.
On the fiscal front, the introduction of new tax reforms marks a significant step toward improving non‑oil revenue mobilisation through broader tax coverage, better compliance, and enhanced administrative efficiency. However, the overall fiscal position remains vulnerable. Weaker oil revenues, elevated debt‑servicing costs, and election‑related spending pressures are expected to keep the deficit elevated at close to 4% of GDP, with borrowing needs rising further in 2026. While recent budget assumptions are more realistic than in previous years, execution risks and political constraints are expected to limit the depth of further reform.
Externally, Nigeria is expected to maintain a current account surplus, supported by reduced oil imports due to expanding domestic refining capacity, steady remittance inflows, and improving non‑oil exports. Nevertheless, sober crude oil prices and modest production levels pose downside risks. The Naira is projected to remain relatively stable, averaging around ₦1,475/US$, supported by reserve buffers and improved foreign exchange market confidence.
Despite macroeconomic improvements, social conditions remain fragile. Consumer purchasing power is only expected to recover slowly, with households remaining highly value‑driven amid low incomes, unemployment, and insecurity. Poverty remains widespread, with an estimated 139 million Nigerians living below the poverty line, while food insecurity has worsened sharply, affecting over 30 million people during the recent lean season. Government social interventions have helped cushion hardship but have not yet delivered broad‑based welfare gains.
Insecurity continues to represent a major downside risk to both economic performance and social stability. Persistent banditry, kidnappings, insurgency, communal violence, and separatist tensions are disrupting livelihoods, agricultural production, and investment confidence. While international security cooperation and intensified military efforts may yield tactical gains, sustainable improvements will require deeper institutional reform, economic inclusion, and governance strengthening.
Politically, the outlook is shaped by growing incumbency advantages ahead of the 2027 elections, but public dissatisfaction over economic hardship and insecurity remains a key wildcard. As electioneering intensifies, policy momentum is likely to slow, increasing the risk that macroeconomic stabilisation does not fully translate into inclusive growth.
Overall, 2026 is set to be a year of cautious consolidation, marked by improving macroeconomic fundamentals, but constrained by fiscal pressures, social fragility, and security risks. Translating stabilisation into durable, inclusive growth will depend on sustaining reforms, improving security, strengthening implementation capacity, and restoring household incomes.
To download the full report, please click on the link below.
CSL Research 2026 Outlook – Sustaining Reform Momentum Amid Social Strain and Political Transition.pdf
