Though Nigeria is currently confronting structural and transitory challenges with the economy operating substantially below its potential output level, there are indications that the trend will be reversed if plans by the government to boost growth are well implemented.
The economic outlook for the fourth largest economy in Africa as painted by financial experts suggests that it could climb to the second largest economy position in Sub-Saharan by 2026. It is expected that the economy will grow at 3.5 percent (about $400bn) while inflation will tapper to 22 percent compared to 32.15 percent recorded in August, 2024.
According to projections by financial pundits who gathered at the second Access Bank Customers’ Forum which was held in September in Lagos, the base lending rate of the Central Bank of Nigeria which stands currently at 26.25 percent could drop to 20 percent, forcing down the level of bad loans in the economy. Also, the exchange rate is seen to decline marginally with Naira trading at N1, 550/$ at the parallel market in 2026.
The Chief Operating Officer, Financial Derivatives Company Limited, Bismarck Rewane, in his presentation titled: “Nigeria in 2026”, noted that the Nigerian Stock Market, which is a barometer for measuring economic growth is expected to double its current size (market capitalization) of N55 trillion by 2026.
He attributed his forecast to the listing of big cap stocks like Dangote refinery and NNPC amongst others between 2025 and June 2026.
“Blue-chip companies are restoring shareholder’s value resulting from FX losses. A moderation in rising Treasury bill rates will encourage greater diversification and participation in the NGX. High borrowing costs will however impact the profitability and valuations of Nigerian firms,” Rewane noted.
However, he said the high rate of inflation remains a major challenge for Nigerian companies and their operating margins even as a widening inequality and worsening cost of living crisis heightens the risk of social unrest in the country.
Rewane noted with dismay that the current reforms of government, aimed at resetting the economy for industrial takeoff are facing pushbacks and backlashes partly due to poor reform designs, lack of sequencing, and clash of interests.
Meanwhile, he acknowledged that the reforms have achieved some gains such as the alignment of the exchange rate which would enhance a proper forex system that is functioning.
Due to intervention funds, diaspora remittances, and exchange rate adjustment policies, the creative art and tourism industry would contribute to inflows in the forex market as total factor productivity would increase to 2.6 percent in 2026 from 2.4 percent in 2024.
Some other positive signs to expect in 2026, according to the FDC boss, are that the nation’s trade balance would reach $9.3billion from $8.42billion in 2024, while petrol price would be stable at N900/litre, hinging his optimism on Dangote refinery and production from modular refineries which will guarantee regular petrol supply.
How to achieve 2026 goals
Recommendations by experts on how the government can make the 2026 growth outlook achievable include a robust and well-implemented stabilization package, efficient auction system, recapitalization of the Bank of Industry and Agriculture to drive SMEs funding and farmers.
Government must continue to deal with exchange rate misalignment, ensure power sector reforms and privatize assets and concessioning of roads, rails and ports.
Experts also said the government must liberalize telecom tariffs, privatize state-owned refineries, restructure debt and overhaul the governance process if it wants to realize the economic growth it desires in 2026.
‘ASAP’ to the rescue?
Nigeria’s Minister of Finance and Coordinating minister for the economy, Wale Edun, unveiled plans by the government to drive economic growth in the economy with its Accelerated Stabilization and Advancement Plan.
ASAP is a short-term fiscal intervention to stabilize and advance the economy. To achieve the goal, the government has earmarked N2.2 trillion or 0.96 percent of GDP.
There are two approaches to the programme: First is the demand channel (households) aimed at boosting household demand and ameliorate the cost-of-living crisis on the average Nigerian. On the cost side (Corporates), ASAP aims at serving as working capital stimulus for the productive sector of the economy, aiding backward integration supports, low-cost financing, downward tariff review and review of multiple taxation.
“Experts also said the government must liberalize telecom tariffs, privatize state-owned refineries, restructure debt and overhaul the governance process if it wants to realize the economic growth it desires in 2026”
Edun explained that the fiscal stimulus package acts as a growth mechanism by injecting money into the economy to boost demand, employment, and production. This, according to him, will lead to lower prices for consumers. It is expected to make Nigerian products more competitive both domestically and internationally while increasing purchasing power for consumers, leading to higher consumption levels.
On the production side, ASAP is targeted towards achieving backward integration intervention and trade finance for the manufacturing outfits.
“ASAP will promote local industries, create more job opportunities, enhance trade competition, improve investment climate and foster economic growth,” he said.
The stimulus package under ASAP is expected to achieve improved supply chain efficiency, business expansion and growth, support for Small and Medium-sized Enterprises (SMEs), stabilization of prices and inventories and enhanced trade and export competitiveness.
On a broader scale ASAP will reduce multiplicity of tax and trade facilitation across borders and ports of entry. These on the other hand are expected to increase revenue generation, increase import and export activities, attract influx of foreign investors and enhance productivity and innovation.
The Tinubu’s administration by the planned stimulus package hopes to boost aggregate output by 2.8 times. This will amount to N6.16 trillion.
If well implemented, it could create 500,000 direct jobs and 1.1million indirect jobs.
But as laudable as the intervention plan espoused by Edun appears, analysts are of the opinion that it is big enough to achieve the kind of impact desired by the government. Citing the examples of similar interventions in South Africa and the United States, financial experts said a N2.2 trillion budget for the planned intervention which represents only 0.96 percent of the nation’s GDP is a child’s play.
Fallouts of FG’s stabilization plan
So far, the implementation of the Federal Government’s stabilization plan cannot be said to be yielding much fruit as desired by Nigerians.
This is because the misery index has risen beyond measure in the last 18 months of this administration.
Chairman, Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, said the number of Nigerians living in monetary poverty has increased over 95million compared with the multidimensional poverty (133m).
He noted that the high inflation figure at 32.15 percent at the end of August 2024 which represents five times the global average has resulted in unemployment at 5 percent (working poor).
A major impact of government’s policy fallouts is the brain drain due to emigration, and corporate divestments and delisting of companies from the stock market.
Rewane disclosed that Nigeria’s rising debt burden had increased to N121trillion while the effective lending rate between 33-35 percent and MPR at 26.75 percent has reduced productivity in the economy.
The way to go: A peer- 2-peer analysis
South Africa, which recently became Sub-Saharan Africa’s largest economy, had to stimulate economic growth on two occasions in recent times with realistic stabilization package plans.
Data provided by FDC Limited showed that South Africa’s stabilization packages / fiscal response during its economic downturn in 2008-2009 stood at R787bn which represents (7.5% of GDP) and in the COVID-19 era in 2020, R500bn fiscal stimulus package, approx. 10 percent of GDP was spent.
According to Rewane, South Africa was strategic in the disbursement of the funds, focusing directly on health, social assistance & grants, and public infrastructure investment. The impact is measurable and visible as it resulted in a rebound in the economy by 4.9 percent in 2021 and created jobs.
In the case of the USA, a $2.2trn stimulus package (10% of GDP) was initially spent to stimulate the economy in 2020 when COVID-19 had its grips on the economy. In addition the government disbursed $1.9trn in 2020 to make the US economy rebound by 5.7 percent in 2021, fastest in decades. Unemployment also dropped from the peak of 14.7 percent in 2020 to 4.0 percent in early 2022.
The strategies deployed to achieve the great feats include direct payments to households, unemployment insurance, child tax credit, and business support for the citizens.
Expectations from financial sector
Just like other critical sectors of the economy, the financial sector is expected to play a key role for the 2026 goals to be achieved.
It is expected that leading lenders like Access Bank blaze the trail by investing in digital payment infrastructures and fostering fintech alliances.
Meanwhile, Access Bank is already taking the lead with its annual economic forum where burning issues in the economy are brought to the table for discussions by experts in the financial industry and policy makers with the aim to chart a course for economic growth and development.
For the financial sector, investment opportunities in green bond initiatives, sustainable projects as well as opportunities exist in creating or partnering with platforms that offer personal loans, salary advances, and buy-now-pay-later (BNPL) products are some of the areas it can make its contributions.
Growth sectors
A couple of sectors of the economy will emerge beneficiaries of the stabilization plan. For instance, the manufacturing sector has been tipped to grow by 3.0 percent by June 2026, from 1.25 percent in 2024 while Oil will grow from 1.4 percent in 2024 to 1.5 percent. Agriculture is expected to grow by 2.85 percent in half year of 2026 compared to 2.15 percent in half year 2024. The financial services sector, going forward, will move from 33.24 percent to 35.86 percent in 2025 to 38.45 percent in 2026.
Benefits of stabilization plans for the financial sector among others are increased demand for financial products, increased liquidity, and improved asset quality.
Conclusion
The stabilization plan is expected to stimulate economic activity but could be a pipe dream, if the implementation is compromised.
