This article by Mark ITSIBOR writes on why fiscal authorities must heed the warnings of the CBN - in its recent economic outlook - to secure stronger economic outcomes in 2026
At a time when global economic uncertainty continues to test the resilience of emerging markets, Nigeria's macroeconomic outlook for 2026 offers a cautiously optimistic narrative. In its latest Macroeconomic Outlook for Nigeria, 2026, aptly titled "Consolidating Macroeconomic Stability Amid Global Uncertainty," the Central Bank of Nigeria (CBN) presents a forward-looking assessment that points to strengthening growth, easing inflationary pressures, improving external buffers and a more stable financial system.
Yet, beneath the optimism lies a clear and consistent message: the success of Nigeria's economic trajectory in 2026 will depend as much on fiscal discipline as it does on monetary prudence.
While the CBN has outlined a coherent pathway for macroeconomic stability, it has also issued firm warnings that fiscal slippages could easily undermine these gains.
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The outlook, therefore, is not merely a projection; it is a policy signal -- one that places responsibility squarely on fiscal authorities to align spending, borrowing and revenue mobilisation with macroeconomic realities.
The CBN projects that Nigeria's economy will expand by 4.49 per cent in 2026, building on an estimated 3.89 per cent growth in 2025, which itself marked an improvement over 3.38 per cent recorded in 2024. This acceleration reflects a combination of structural reforms, improving oil sector performance and resilience in non-oil activities.
Importantly, the growth outlook is not predicated on a single sector. Gains are expected from increased oil production supported by enhanced security surveillance, alongside rising investments and improved domestic refining capacity.
At the same time, continued reforms are expected to foster a more conducive business environment, strengthen investor confidence and support private-sector-led expansion.
This broad-based recovery underscores the effectiveness of recent macroeconomic adjustments, particularly tighter monetary conditions and enhanced coordination between fiscal and monetary authorities.
The CBN's assessment suggests that Nigeria has begun to emerge from a period of macroeconomic fragility into one of measured stability.
Perhaps the most striking projection in the outlook is inflation. Headline inflation, which averaged 21.26 per cent in 2025 following the rebasing of the Consumer Price Index, is projected to moderate sharply to 12.94 per cent in 2026.
The projected disinflation reflects the cumulative impact of tight monetary policy, exchange rate stability and improved policy coordination. Declining food prices, easing logistics pressures and lower premium motor spirit (PMS) prices are also expected to play a role.
However, the CBN is unequivocal in its caution: inflation gains remain fragile. Excessive fiscal spending above budgetary benchmarks, especially if financed through borrowing or central bank liquidity, could reverse the disinflation trend. In such a scenario, the Bank warns, it may be forced to tighten monetary policy again -- an outcome that could dampen growth prospects.
This warning places fiscal authorities at the centre of Nigeria's inflation outlook. Monetary discipline alone cannot anchor prices if fiscal policy remains expansionary and misaligned with macroeconomic conditions.
On the external front, the outlook paints a positive picture. Nigeria's external reserves are projected to rise to $51.04 billion in 2026, up from an estimated $45.01 billion in 2025. The current account surplus is expected to widen significantly to $18.81 billion, supported by strong exports, steady remittance inflows, increased oil and gas output and improved domestic refining capacity.
Foreign exchange market reforms are expected to sustain relative exchange rate stability, while attractive yields are projected to support portfolio inflows. These developments signal growing confidence in Nigeria's external position and policy framework.
Yet, the CBN is careful not to overstate the resilience of these buffers. The Bank warns that sudden deterioration in global financial conditions, renewed geopolitical tensions or re-escalation of protectionist trade policies could trigger capital flow reversals. In such circumstances, excessive fiscal deficits or uncoordinated borrowing could quickly translate into exchange rate pressure and reserve drawdowns.
The message is clear: external stability is as much a function of fiscal restraint as it is of monetary credibility.
Debt and Deficits: The Fiscal Fault Line
Nowhere is the CBN's warning to fiscal authorities more explicit than in its assessment of public finances. While acknowledging improvements in fiscal space in 2025, the Bank projects that public debt will rise to 34.68 per cent of GDP by end-2026, from 33.98 per cent as at June 2025.
The increase reflects expected new borrowings to finance a provisional fiscal deficit of ₦12.14 trillion, equivalent to 3.01 per cent of GDP, with retained revenue and expenditure projected at ₦35.51 trillion and ₦47.64 trillion, respectively.
Although the debt-to-GDP ratio remains moderate by international standards, the CBN stresses that sustainability hinges on discipline. Rising debt without commensurate revenue growth could increase debt service burdens, crowd out private investment and heighten macroeconomic risks.
To this end, the Bank urges fiscal authorities to broaden the tax net and implement the Nigeria Tax Act, 2025, effectively. An efficient, equitable and predictable tax system, the CBN argues, is essential to reducing reliance on borrowing and safeguarding macroeconomic stability.
Financial System Stability and Market Confidence
The outlook also projects a stable financial system in 2026, supported by robust regulatory oversight and macro-prudential measures. The banking sector is expected to remain resilient, while the capital market is projected to stay bullish, buoyed by the ongoing bank recapitalisation exercise and rising investor confidence.
However, the CBN cautions that rising non-performing loans or excessive concentration risks could weaken asset quality and pose systemic threats. Once again, fiscal behaviour matters. Poor budget execution, delayed payments or policy uncertainty could transmit stress to the financial system.
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Why Fiscal Discipline Matters More Than Ever
What emerges from the CBN's outlook is a coherent macroeconomic strategy anchored on price stability, exchange rate credibility and financial resilience. The Bank's projections are not aspirational; they are conditional. They assume fiscal prudence, policy consistency and respect for institutional boundaries.
In effect, the CBN has laid out a roadmap -- but it is one that fiscal authorities must walk alongside it. Excessive spending, weak revenue mobilisation or deviation from fiscal rules would not merely undermine projections; they would force difficult policy trade-offs that could slow growth and erode public confidence.
A Window That Must Not Be Missed
The year 2026, as the CBN rightly observes, presents a realistic window for consolidating macroeconomic stability. Growth is recovering, inflation is easing and external buffers are strengthening. These gains, however, are neither automatic nor irreversible.
If fiscal authorities heed the CBN's warnings -- by aligning spending with revenue, adhering to debt sustainability thresholds and deepening tax reforms -- Nigeria stands a strong chance of translating macroeconomic stability into tangible economic welfare.
The outlook, ultimately, is both a vote of confidence in Nigeria's reform trajectory and a reminder that discipline, not complacency, will define the country's economic fortunes in 2026.
