The International Monetary Fund (IMF) and World Bank forecast a 4.4% GDP expansion for 2026, showing that the year is positioned for transformation. This projection hints at significant progress for the Nigerian economy when compared to previous years. In Q3 2025, GDP stood at 3.98%, and the shift to 4.4% reveals a 0.42% increase in GDP growth. If this projection holds, it will positively impact the Nigerian economy. We are looking at a scenario where inflation levels drop, effectively boosting investor confidence and possibly increasing employment levels. These impressive projections align with the Nigeria Tax Act 2025, which, as it kicks into full effect, is set to anchor the Nigerian economy on a path towards stable and transformative growth.

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The Nigerian Economy in 2026

The Nigerian economy in 2025 was characterised by policy reformation and impressive growth across sectors. The Central Bank of Nigeria (CBN) maintained a restrictive monetary policy stance, which relatively stabilised the naira. The National Bureau of Statistics (NBS) reported that headline inflation eased to 15.15% in December 2025 from 17.33% in November, revealing a persistent decline throughout the year. Nigeria also recorded year-on-year GDP growth of 3.13% in Q1 2025 and 4.23% in Q2 2025. The service industry was the major contributor to GDP in both quarters, accounting for 57.50% in Q1 and 56.53% in Q2. As it unfolds, 2026 promises to be a transformative year for the country, sustaining this momentum from 2025. 

To map this momentum, the Veriv Africa Macroeconomic Outlook 2026 used a Vector Autoregressive (VAR) model to project real-sector performance by analysing the impact of various factors on macroeconomic indicators.  The projected best case scenario from the report is a GDP increase of 4.6%, assuming positive shifts for the economy in 2026.  This scenario hinges on stability in Nigeria’s fiscal and monetary landscape. Additional forecasts from the outlook reveal a decline in inflation rate and MPR  to 14% and 23.5% respectively, and the naira appreciating to approximately ₦1,300 per US dollar.

GDP Forecast
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How do these numbers affect us? Imagine two individuals: Chi and Isiaka. Chi is the CEO of The Figurine, a fashion house that manufactures exquisite custom and ready-to-wear pieces. Isiaka, on the other hand, is a commercial farmer with one goal: to scale his harvest enough to feed a large portion of the nation.
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In the best case scenario, business is booming for Chi, and Isiaka could not have asked for a better year. Chi is shielded from global shocks because she sources her materials locally. With MPR easing to 23.5%, the interest rate becomes more manageable. This allows Chi to secure a loan and expand her business. Expansion means more hands on deck, and so Chi hires 3 more employees, therefore creating more employment opportunities. At the end of the year, Chi doubles her annual revenue, repays her loan, and is ready for further expansion. Isiaka experiences similar growth in his agro-business. Isiaka also takes a loan to purchase better farming equipment and expand his storage facility. With better equipment, he can increase production and store his harvest more efficiently. This means less waste and more revenue. Due to inflation easing to 14%, food prices drop, and nationwide demand increases. Isiaka is not only well-equipped to meet this demand, but by the end of the year, he doubles his productivity and income. Ultimately, the best case scenario shows that macroeconomic stability empowers average Nigerians like Chi and Isiaka to build their businesses at the micro level.

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The worst case scenario presents a different perspective. The inflation rate is projected to average 26%, which will prompt the Central Bank to raise the MPR to 28.5% and for the exchange rate to weaken to ₦1,745 per US dollar. In this scenario, GDP growth is forecasted at 2.86% in 2026. What does this mean for Chi and Isiaka?

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For both of them, 2026 would be an uphill battle. Chi sources her materials locally; however, her suppliers import in bulk from other countries. As the exchange rate hits ₦1,745, her suppliers face higher costs, and they pass those costs on to her. Simultaneously, as inflation rate rises to 26%, it eats into the disposable income of average Nigerians, and they can no longer justify purchasing exquisite fashion pieces from businesses like The Figurine. An MPR of 28.5% means that if Chi needs a loan to keep her business afloat during this economic downturn, the interest rate would be so high that it would swallow up her remaining profits. By the end of 2026, Chi may be forced to reduce her employees or compromise on the quality of materials to keep The Figurine afloat.
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Isiaka faces similar challenges on his end of the spectrum. The increase in inflation raises his operational costs. Isiaka’s business is heavily dependent on logistics, and with the high inflation rate, the cost of transportation and fertilizers skyrocket. The 2.86% GDP growth rate means families prioritise basic food needs, reducing consumer demand. Additionally, due to the high MPR, his access to loans is limited, and he is unable to get the extra funds he needs to invest in his farm. Isiaka does not expand his storage facility or upgrade his farming equipment in 2026. Instead, he is forced to sell his harvest at low prices to ensure it sells quickly and reduces spoilage. In this scenario, Isiaka is not meeting his goal of feeding the nation; he is merely surviving.
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Headwinds to Economic Growth in 2026

Even though Nigeria’s economic playing field has been positioned for transformative progress and growth throughout the year, risks to the domestic economy still exist. Despite efforts to diversify, Nigeria’s fiscal stability remains connected to global crude prices, with oil still accounting for 65% of government revenue and 86% of total exports. While the  Dangote Refinery has significantly reduced refined petroleum imports, Nigeria still imports 69% of its refined petroleum. Additionally, without a truly competitive downstream petroleum sector, the risk of running a monopolistic market is introduced, therefore limiting the benefits of the fuel subsidy removal. 
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Additionally, non-oil sectors operate below par due to factors such as high operational costs, the alarming rate of insecurity, and infrastructure gaps. These bottlenecks increase unemployment levels, stunt productivity, and negatively affect Nigeria’s current account balance and exchange rate. Furthermore, Nigeria’s debt financing culture remains a major threat to economic growth. With the 2026 budget set at ₦58.47 trillion, a budget deficit of ₦20.1 trillion, and debt service projected at ₦15.91 trillion, there is a risk that persistent borrowing will undermine the fiscal gains from reforms such as the fuel subsidy removal. To prioritise growth, borrowing must be limited and directed towards high-yielding productive economic activities. 
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Furthermore, pervasive insecurity continues to act as a ceiling on the agricultural sector’s potential. Commercial farmers like Isiaka remain vulnerable to the activities of non-state armed actors, which disrupts supply chains. Despite various domestic and international interventions, a definite solution to this threat remains elusive, hindering Nigeria’s path to sustainable food security. Similarly, oil pilferage and illegal mining operations continue to impact public revenue and stifle the formal and energy sectors. These structural headwinds pose a significant threat to the 2026 growth projections. Without a resolution to these gaps, the forecasted growth remains at high risk.

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Why Should You Care?

In both the best and worst case scenarios, the lives of Isiaka and Chi hang in the balance. When the macro-economy stabilises, that stability extends to every Nigerian household, potentially making or breaking their year. Every Nigerian silently prays for a time when growth is tangible enough to affect their own reality positively, and for many, 2026 is forecasted to be the answer to that prayer. 

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But growth is not a guarantee. The headwinds of debt, insecurity, and oil dependence pose major obstacles to these projections. While Chi and Isiaka have been promised growth, their dreams remain caught in the gap between a 4.6% best case expansion and a 2.86% worst case struggle. Will Nigeria’s trajectory meet these projected expectations? The answer is not straightforward. For the economy to experience the projected expansion, the structural challenges that hinder this growth must be addressed, or we risk remaining in the same place for a long time. 

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References

Adigun, O. (2025, December 20). FEC approves N58.47 trillion 2026 budget proposal.

Nairametrics.https://nairametrics.com/2025/12/20/fec-approves-n58-47-trillion-2026-budget-proposal/

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Adigun, O. (2026, January 19). IMF raises Nigeria’s 2026 growth rate forecast to 4.4%. 

Nairametrics. https://nairametrics.com/2026/01/19/imf-raises-nigerias-2026-growth-rate-forecast-to-4-4/

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Angbulu, S., & Tunji, S. (2025, December 4). Nigeria’s 2026 budget: N20.1tn deficit sparks 

concern. The Punch. https://punchng.com/fg-unveils-n54-43tn-budget-as-debt-service-gulps-n15-91tn/

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Ogunbewon, A. (2026, January 14). World Bank projects Nigeria’s economy to grow 4.4% in

 2026. The Nation. https://thenationonlineng.net/world-bank-projects-nigerias-economy-to-grow-4-4-in-2026/

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Tunji, T. (2026, January 15). Nigeria inflation hits 15.15% by December 2025 after CPI 

methodology review. Nairametrics. https://nairametrics.com/2026/01/15/nigeria-inflation-hits-15-15-by-december-2025-after-cpi-methodology-review/

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Veriv Africa. (2025). Nigeria macroeconomic outlook 2026. 

https://www.verivafrica.com/2026outlook

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