NIGERIA’S ECONOMIC OUTLOOK IN 2026: BETWEEN FISCAL DISCIPLINE AND GROWTH EXPECTATIONS – By OLAYINKA OLATUNBOSUN, PhD, FCIB, FNIM, FCILRM, FCE, fnimn, MCIPM

Nigeria’s 2026 economic outlook, as outlined in President Bola Ahmed Tinubu’s ₦58.18 trillion Appropriation Bill before the National Assembly, suggests an economy seeking stability after two years of far-reaching reforms, while still contending with familiar fiscal and structural pressures.

The proposal, tagged the “Budget of Consolidation, Renewed Resilience and Shared Prosperity,” signals the Federal Government’s intention to entrench macroeconomic discipline, consolidate recent gains from subsidy removal and exchange-rate reforms, and stimulate growth in key sectors of the economy.

FISCAL FRAMEWORK: EXPANSION UNDER TIGHT CONSTRAINTS

At ₦58.18 trillion, the 2026 budget is Nigeria’s largest ever in nominal terms. Expected revenues of ₦34.33 trillion leave a deficit of ₦23.85 trillion, representing about 4.3 per cent of GDP — within legal thresholds but significant in an environment of high debt-service obligations.

Analysts note that while deficit financing is not unusual, Nigeria’s low revenue base remains the central concern. Debt servicing continues to consume a substantial portion of federally collected revenues, limiting fiscal flexibility and increasing sensitivity to revenue shocks.

The government plans to finance the gap through a combination of domestic borrowing, concessional external loans, and asset optimisation — measures aimed at reducing pressure on the local credit market.

MACROECONOMIC ASSUMPTIONS: A SHIFT TO REALISM

Unlike previous budgets criticised for over-optimism, the 2026 estimates reflect a more cautious stance:

• Oil benchmark: about US$64.85 per barrel

• Production: approximately 1.84 million barrels per day

• Exchange rate: around ₦1,400 to the dollar

This realism aligns with recent policy direction and may help reduce mid-year budget revisions — a development welcomed by investors and fiscal analysts.

INFLATION, FX STABILITY AND MARKET SIGNALS

Nigeria enters 2026 with improving macroeconomic indicators. Inflation, which peaked sharply in early 2025, moderated significantly towards the end of the year, aided by monetary tightening and easing supply constraints.

Foreign exchange liquidity has improved following reforms in the FX market, while external reserves have strengthened. Although the naira remains vulnerable to global shocks, the narrowing gap between official and parallel market rates has boosted market confidence.

However, economists warn that fiscal expansion must be carefully managed to avoid reversing gains made on inflation and exchange-rate stability.

SPENDING PRIORITIES: SECURITY AND INFRASTRUCTURE TAKE CENTRE STAGE

Sectoral allocations reveal government priorities aimed at stabilising the economy and improving productivity:

• Defence and Security: ₦5.4 trillion

• Infrastructure: ₦3.5 trillion

• Education: ₦3.52 trillion

• Health: ₦2.48 trillion

Security spending reflects the administration’s belief that economic recovery cannot be sustained without addressing insecurity, especially in farming communities and transport corridors. Infrastructure investments are expected to support manufacturing, trade and job creation, though past experience shows that execution remains the real test.

GROWTH OUTLOOK: SERVICES AND NON-OIL SECTORS LEAD

The government projects economic growth of around 4 per cent in 2026, driven mainly by services, agriculture, manufacturing recovery, and the digital economy.

Oil remains important for fiscal revenues, but non-oil sectors are increasingly positioned as the backbone of growth. Analysts view this shift as positive but caution that productivity gains and private-sector confidence will depend on consistent policy implementation.

INVESTOR CONFIDENCE: CAUTIOUS BUT IMPROVING

For Nigerian businesses and investors, the 2026 budget sends mixed but improving signals. Policy continuity, realistic assumptions, and efforts to boost revenue collection have been positively received.

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However, concerns persist around:

• Rising fiscal deficits

• Debt sustainability

• Budget implementation capacity

Market watchers say Nigeria’s outlook in 2026 will be shaped less by policy announcements and more by execution discipline, revenue reforms, and the government’s ability to resist populist spending pressures.

CONCLUSION: A YEAR OF TESTING CREDIBILITY

Nigeria’s economic outlook for 2026 is one of measured optimism. The budget reflects a government conscious of market scrutiny and determined to consolidate reforms rather than reverse them.

If fiscal discipline holds and capital spending translates into real economic activity, 2026 could strengthen Nigeria’s recovery narrative. Failure, however, could expose the economy once again to inflationary pressures and debt stress.

For businesses, investors and households alike, 2026 will be a year to watch — not just for promises made, but for results delivered.

Dr. Olatunbosun is the Managing Consultant, HyzikConsulting Limited, Abuja, Nigeria.