By Our Reporter
Nigeria’s economy has been projected to consolidate its reform gains and record between 3.6 and 4.0 percent of Gross Domestic Product, GDP, growth in 2026, underpinned by non-oil sector expansion, policy stability and renewed investor confidence .
This projection contained in the FMDH Merchant Bank’s newly released macroeconomic report titled, ” from Reform to Resilience”, unlocking Nigeria’s next growth chapter, painted a cautiously optimistic picture of the country’s economic outlook as recent fiscal and monetary adjustments’ begin to yield measurable results.
The report drew attention to fiscal pressures despite improved revenues.
Nigeria’s total public debt has surged to N152 trillion by mid 2025, driven by exchange rate adjustments and fresh borrowing, even though the debt to GDP rating remains moderate at about 40 percent.
“External debt servicing which reached a record high of $4.7 billion in 2024, continues to strain fiscal space absorbing close to 9 percent of export receipts.
“New measures such as the 15 percent import duty on petrol and diesel introduced in October 2024 and the Capital Gains Tax reforms taking place effective January 2026 are expected to broaden the tax base, promote fairness and strengthen fiscal sustainability even if they create short term price pressure.
“Microeconomic indicators point to an improving environment, GDP growth reached 4.2 percent in the second quarter of 2025, the highest since 2021, as Agriculture, transport, ICT and finance sectors record strong performance.
“inflation has declined slowly below 20 percent for the first time in two years, external reserve rebounded by over $5 billion in the third quarter to $42.9 billion and the naira appreciated consistently since mid-year”, the bank said.
FSDH projected inflation rate to moderate further to between 17 and 19 percent in 2026, from 18 percent in September 2025 and a peak of 24.5 percent in the year aided by more stable exchange rate, easing food prices and sustained disinflation momentum.
“The naira which appreciated to N1,460 in October 2025, is forecast to remain broadly stable within the N1,520 to N1,590 range in 2026 supported by rising reserves and improved market transparency.
“In its moderate case projection, adopted as the base scenario, FSDH assumes an average oil price of $70 per barrel and production at 1.62million barrels per day, resulting in 3.8 GDP growth, inflation at 20.9 percent, external reserves of $39.6 billion and an average exchange rate of N1,523/$.
“A best case outlook driven by stronger oil price and improved revenue implementation could see growth reach 4.4 percent, while a worse case scenario marked by oil market weakness and domestic supply disruptions could slow expansion to 2.2 percent and push inflation to about 29 percent, the report read.
The FSDH added that on fiscal and monetary dynamics, a gradual shift from aggressive monetary tightening to cautious easing following the Central Bank of Nigeria’s first interest rate cut in five years in September 2025, when the Monetary Policy rate was lowered from 27.5 percent to 27 percent.
FSDH anticipates further moderation to the MPR to between 21 and 24 percent in 2026, conditioned on sustained price stability and persistent foreign exchange inflow.
While the policy easing is expected to relieve borrowing cost, the bank notes that monetary transmission remains very weak, with wide spreads between the policy rates, deposit rates and market lending rates, underscoring the need for stronger coordination and credibility in monetary signaling .
It added that real interest rates have turned positive, reflecting a more credible policy stance and renewed appetite for naira assets, noting that capital market investment have strengthened with bond yields easing from nearly 20 percent in late 2024 to 16 percent, while Nigeria Exchange All Share Index has gained more than 50 percent year-to-date supported by stable micro conditions and rising corporate earnings.
Looking ahead, FSDH identifies several factors that will define Nigeria’s macroeconomic direction in 2026 – oil volatility, digital financial inclusion, the banking sector recapitalization drive scheduled for completion by April 2026, implementation of the new tax law, election related spending pressures and industrial tensions linked to the Dangote Refinery.
The bank noted that Nigeria recent removal from the Financial Task Force grey list will further strengthen investors confidence, enhance financial transparency, and lower cross border transaction cost, positioning the country for increased portfolio inflows and stronger correspondent banking relationships.
The report stressed that Nigeria economic trajectory is shifting from short-term stabilization to long term resilience. The combination of foreign exchange liberalization, subsidy removal, fiscal reforms and renewed monetary discipline has begun to restore macroeconomic balance and investors trust.
FSDH recommends that to consolidate these gains, the government needs to deepen its investment in productive sector in manufacturing, agribusiness, ICT, accelerating the monetisation of public assets through public-private partnership, improving fiscal efficiency, and leveraging the on-going banking capitalization to enhance credit access.
It also urges that fiscal savings be channeled towards infrastructure, education and human capital development to translate microeconomics stability into inclusive sustainable growth.
It predicts that reforms mature and external headwinds ease, 2026 could mark the start of Nigeria’s growth phase, one defined less by crisis management and more by resilience, productivity and investor confidence.