The Central Bank of Nigeria (CBN) has forecast 4.49 per cent economic growth and a decline in inflation to an average of 12.94 per cent for 2026.
In its economic outlook released yesterday, the CBN attributed the anticipated growth and easing of inflation to stable foreign exchange markets and increased oil production. The projections reflect cautious optimism following two years of reforms under President Bola Tinubu’s administration, with the bank relying on structural improvements in oil, tax, and forex markets to sustain growth and lower inflation.
The apex bank expects stronger non-oil growth and improved external buffers next year, even as fiscal deficits and external vulnerabilities persist. The report stated:
“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 CBN noted that easing monetary policy would further stimulate growth by reducing the cost of borrowing.
Interest Rate and Inflation Outlook
At its year-end meeting in November, the CBN kept its key interest rate at 27 per cent, opting to allow inflation to cool gradually. However, the bank reduced the deposit rate, signaling confidence in the economy.
The decision surprised some economists, who had expected a 100 basis-point cut following September’s rate adjustment—the first since 2020.
Headline inflation, which averaged 21.26 per cent in 2025, is expected to fall next year as food and fuel prices stabilize and forex market stability eases cost pressures. In November, inflation slowed for the eighth consecutive month, coming in at 14.45 per cent.
Oil, Fiscal, and External Sector Projections
The CBN outlook assumes oil prices at $55 per barrel, production of about 1.5 million barrels per day, and an official exchange rate near N1,400 per dollar. Fiscal spending is projected to remain expansionary, with a deficit of N12.14 trillion (3.01 per cent of GDP), largely financed through domestic borrowing.
External reserves are expected to rise to $51.04 billion, supported by stronger oil and non-oil exports and remittances, while the current account is forecasted to register a surplus of $18.81 billion.
CBN Governor’s Remarks
CBN Governor Olayemi Cardoso highlighted the economy’s transition from crisis management to sustainable recovery over the past year.
“After nearly a decade of real GDP growth averaging about two per cent, reforms have restored momentum and confidence in our macroeconomic environment. Our economy grew by 4.23 per cent in Q2 2025—the fastest pace in four years—driven by telecommunications, financial services, and oil production,” he said.
Governor Cardoso also noted the steady moderation of inflation. From a peak of 34.6 per cent in November 2024, inflation fell to 16.05 per cent in October 2025, marking seven consecutive months of disinflation. Food inflation, the largest component, declined to 13.12 per cent in October, down from 21.87 per cent in August.
The Governor emphasized that the decline in inflation is restoring purchasing power for households and businesses and reflects disciplined implementation of orthodox monetary policy.
“Price stability is the foundation for sustainable growth. Our shift to an inflation-targeting framework is gaining traction, supported by improved data analytics, stronger communication, and the end of monetary financing of fiscal deficits. These measures have strengthened monetary policy transmission and anchored expectations,” he said.
Looking ahead, the CBN expects continued disinflation in 2026, supported by stronger domestic production, better FX liquidity, and disciplined liquidity management. Policy rates will be adjusted based on evolving data, ensuring a data-driven and evidence-based approach to price stability.
“Domestic and international observers have noted Nigeria’s remarkable turnaround in macroeconomic management. Our commitment remains unwavering: monetary policy will stay evidence-based, data-driven, and focused on ensuring price stability,” Governor Cardoso concluded.
