Nigeria: Economy will profit from financial sector reforms – CBN’s outlook for 2026

The Central Bank of Nigeria (CBN) has projected a 4.49 per cent economic growth and inflation easing to an average 12.94 per cent in 2026. In its economic outlook for 2026, the apex bank said the growth and inflation easing will be driven by stable forex markets and rising oil output following critical reforms.

The apex bank also tipped foreign reserves to hit $51.04 billion even as cost of lending is projected to decline. These projections will support the apex bank’s broader reforms to enthrone a stronger and viable domestic economy.

The past year was remarkable in many aspects. It was marked by global uncertainty, domestic recalibration, and deep institutional rebuilding.

Yet amid these challenges lies a moment of renewed clarity. Over the past year, the CBN under the leadership of Olayemi Cardoso, took strategic steps to restore macroeconomic stability, rebuilding trust, and strengthening the credibility in the financial services sector.

For many analysts, the progress of the past year will be surpassed in 2026.

In the past year, Cardoso said: “I am pleased to report meaningful progress on all three fronts, even as we remain fully aware of the work ahead. Our actions continue to reflect the policy direction we articulated from the outset, in other words, we said what we would do, and we have done it, transparently and consistently.”

Key targets for this year are set on issues around inflation, growth, foreign reserves and non-oil export earnings.

In its economic outlook for this year, the CBN projected that the country’s external reserves will rise to $51.04 billion in 2026.

The forecast signals optimism after two years of sweeping reforms by President Bola Tinubu’s government, with the bank betting on structural changes in oil, tax and foreign exchange markets to sustain growth and disinflation.

In its 2026 outlook, the apex bank projects stronger non-oil growth and sturdier external. “The growth prospect in 2026 is positive on account of continued gains from broad-based structural reforms… and improved stability in the exchange rate,” the central bank report said. Easing monetary policy would “add impetus to growth following the anticipated reduction in the cost of lending”, it added.

Nigeria’s central bank kept its key rate at 27 per cent in November’s year-ending meeting, opting to let inflation cool further, but trimmed the deposit rate – a vote of confidence in the economy.

The move surprised economists, who had forecast a 100 basis-point cut after September’s first rate reduction since 2020.

According to CBN Governor, Olayemi Cardoso, over the past 12 months, Nigeria’s economy has transitioned from crisis management to laying the groundwork for a sustainable recovery.

“After nearly a decade in which real GDP growth averaged about 2%, reforms have restored momentum and confidence in our broad macroeconomic environment. Our economy grew by 4.23% in the second quarter of 2025, the strongest pace in four years, driven by improvements in telecommunications, financial services, and oil production,” he said.

“More importantly in terms of long-term stability, inflation, while still high, has moderated consistently. From a peak of 34.6 per cent in November 2024, it has more than halved to 14.50 in November 2025. This marks eight consecutive months of disinflation,” he said.

This significant, steady decline in inflation is restoring real purchasing power for households and businesses. It also demonstrates disciplined execution and Nigeria’s return to orthodox monetary policy.

“We continue with determination to bring inflation down further. The current double-digit rate cannot be acceptable. Price stability is the foundation of sustainable growth. Our transition to an inflation‑targeting framework is gaining traction. We have improved data analytics, strengthened communication, and ended monetary financing of fiscal deficits. These actions have strengthened monetary policy transmission and anchored expectations.

“Our models project continued disinflation in 2026, helped by stronger domestic production, improved FX liquidity, and more disciplined liquidity management. As inflation moderates and becomes firmly anchored, we will calibrate the policy rate in line with evolving data.

“Domestic and international observers alike have noted Nigeria’s “huge turnaround” in macroeconomic management. Our commitment remains clear: monetary policy will stay evidence-based, data-driven, and unwavering in its pursuit of price stability.”

According to the apex bank, the expected increase in reserves builds on the positive external sector performance recorded in 2025, when the balance of payments posted an estimated surplus of $5.80 billion, while external reserves rose to $45.01 billion, compared with $40.19 billion in 2024.

The Bank noted that relative stability in the foreign exchange market during 2025 was driven by domestic economic reforms, higher capital inflows, increased export receipts and expanding local refining capacity. These factors, it said, are expected to strengthen further in 2026 and support reserve accumulation.

Looking ahead, the CBN projected that the current account surplus will rise sharply to $18.81 billion in 2026, underpinned by strong exports, steady diaspora remittances, increased oil and gas output, improved domestic refining capacity and rising global demand from key trading partners.

The outlook also showed that portfolio investment inflows and external borrowings are expected to keep the financial account in a net borrowing position of $10.15 billion, while the International Investment Position (IIP) is projected to record a net borrowing position of $69.58 billion in 2026, as attractive yields are anticipated to boost capital inflows.

The Director-General, the West African Institute for Financial and Economic Management (WAIFEM) Dr. Baba Musa, said gains in growth, inflation moderation, and investment confidence mark important progress, but the work is far from complete.

In his report, titled: “Nigeria’s Economic Outlook at a Turning Point”, he said Nigeria’s economic story is one of resilience, renewal, and strategic recalibration.

“To sustain the recovery, Nigeria must maintain macroeconomic stability, deepen structural reforms, and ensure that growth translates into tangible improvements for citizens. Achieving this requires collaboration among government, private sector, civil society, and development partners,” he said.

According to him, by committing to policy consistency, human capital investment, and inclusive growth, Nigeria can consolidate its recovery and emerge as a more competitive, resilient, and equitable economy in the years ahead.

“Globally, economies are grappling with slowing growth, projected at 2.7% in 2025 by the IMF for advanced economies, and heightened geopolitical risks that affect trade and investment. Against this backdrop, Nigeria has demonstrated remarkable determination. Domestically, inflationary pressures, infrastructure deficits, and unemployment persist, yet they now represent policy frontiers rather than defining constraints,” he said.

Musa said recent policy measures, ranging from fiscal consolidation to targeted monetary adjustments, have laid the groundwork for a sustainable growth trajectory.

“The real test, however, lies not only in achieving stability but in ensuring that it translates into tangible socio-economic outcomes: decent jobs, rising incomes, improved productivity, and broader social welfare. If Nigeria deepens reforms, invests strategically in human capital, and leverages its structural advantages, the country can achieve not only recovery but inclusive and durable economic transformation,” he said.

He said the growth for Nigeria is underpinned by stronger oil production following operational improvements and policy reforms in the petroleum sector.

“Recovery in services, particularly telecommunications, financial services, and transport, reflecting resilient domestic demand. Improved agricultural output, thanks to favorable weather patterns and government support for mechanisation and inputs,” he said.

He said the recent GDP rebasing has also given a more accurate reflection of the economy, capturing growth in high-potential sectors such as digital services, modular refining, and the creative industries. This expanded view highlights opportunities for job creation, innovation, and revenue generation that were previously underappreciated.

World Bank’s positive verdict on economy

The World Bank also recently gave a positive verdict on Nigeria’s economic growth trajectory, highlighting three-year unbroken growth for the country.

In the its Global Economic Prospects, the bank posited that Nigeria will have three-year unbroken growth records- growing at 3.6 per cent in 2025, 3.7 per cent in 2026 and 3.8 per cent in 2027.

The World Bank however, slashed its global growth forecast for 2025 by 0.4 percentage point to 2.3 per cent, saying that higher tariffs and heightened uncertainty posed a “significant headwind” for nearly all economies.

In its twice-yearly Global Economic Prospects report, the bank lowered its forecasts for nearly 70 per cent of all economies – including the United States, China and Europe, as well as six emerging market regions – from the levels it projected just six months ago before U.S. President Donald Trump took office.

The bank stopped short of forecasting a recession, but said global economic growth this year would be its weakest outside of a recession since 2008. By 2027, global gross domestic product growth was expected to average just 2.5 per cent, the slowest pace of any decade since the 1960s.

The report forecast that global trade would grow by 1.8 per cent in 2025, down from 3.4 per cent in 2024 and roughly a third of its 5.9 per cent level in the 2000s. The forecast is based on tariffs in effect as of late May, including a 10 per cent U.S. tariff on imports from most countries. It excludes increases announced by Trump in April and then postponed until July 9 to allow for negotiations.

The bank said global inflation was expected to reach 2.9 per cent in 2025, remaining above pre-COVID levels, given tariff increases and tight labour markets.

“Risks to the global outlook remain tilted decidedly to the downside,” the bank wrote. It said its models showed that a further 10-percentage point increase in average U.S. tariffs, on top of the 10 per cent rate already implemented, and proportional retaliation by other countries, could shave another 0.5 percentage point off the outlook for 2025.

According to the World Bank, growth in Sub Saharan Africa is projected to strengthen to 3.7 per cent in 2025 and average 4.2 percent in 2026- 27, assuming the external environment does not deteriorate further, inflation declines as expected, and regional conflicts subside.

It said that despite weakening growth among emerging markets and developing economies (EMDEs) globally, SSA is one of two regions expected to see growth acceleration in the forecast period.

The World Bank Group’s Chief Economist and Senior Vice President for Development Economics, Indermit Gill, said that outside of Asia, the developing world is becoming a development-free zone.

“It has been advertising itself for more than a decade. Growth in developing economies has ratcheted down for three decades—from 6 percent annually in the 2000s to 5 percent in the 2010s—to less than 4 percent in the 2020s. That tracks the trajectory of growth in global trade, which has fallen from an average of 5 percent in the 2000s to about 4.5 percent in the 2010s—to less than three per cent in the 2020s. Investment growth has also slowed, but debt has climbed to record levels.”

The World Bank’s Deputy Chief Economist and Director of the Prospects Group, Ayhan Kose, said emerging-market and developing economies reaped the rewards of trade integration but now find themselves on the frontlines of a global trade conflict.

“The smartest way to respond is to redouble efforts on integration with new partners, advance pro-growth reforms, and shore up fiscal resilience to weather the storm. With trade barriers rising and uncertainty mounting, renewed global dialogue and cooperation can chart a more stable and prosperous path forward,” he said.