Nigeria’s economy is projected to grow by 4.49% in 2026, accelerating from an estimated 3.89% in 2025. This growth is due to higher crude oil production, expanding domestic refining capacity, improving foreign exchange stability, and deepening structural reforms. These factors combine to strengthen the macroeconomic outlook, according to the Macroeconomic Outlook for Nigeria 2026 published by the Central Bank of Nigeria.
The Outlook presents a coordinated narrative: faster economic growth, stronger external buffers, and reform-led institutional anchors are reinforcing one another, marking a shift from crisis management toward medium-term macroeconomic consolidation.
Growth accelerates on oil, refining, and services momentum
At the core of the growth outlook is a rebound in the oil sector. The CBN projects crude oil production to rise to an average of 1.71 million barrels per day (mbpd) in 2026. This is up from 1.67 mbpd in 2025 and 1.56 mbpd in 2024. This increase reflects improved security around oil infrastructure, tighter production monitoring, and renewed investment following implementation of the Petroleum Industry Act (PIA).
Oil sector output expanded by over 9% in 2025, significantly outpacing overall GDP growth. The Bank expects this momentum to continue as disruptions ease. Higher oil output improves fiscal revenue, external balances, and FX liquidity—critical channels through which growth feeds into broader macroeconomic stability.
Alongside crude production, domestic refining is emerging as a structural growth driver. Increased output from large-scale and modular refineries, most notably the Dangote Refinery, is reducing reliance on imported petroleum products. This retains value domestically and supports activity across manufacturing, logistics, trade, and services.
The CBN noted that domestic refining helps moderate energy-related inflation pressures and improves the trade balance. It also reduces FX demand for fuel imports—reinforcing both growth and price stability objectives.
Meanwhile, the services sector remains the backbone of Nigeria’s economy. Growth is being driven by trade, transport, ICT, real estate, and financial services, supported by infrastructure investments, digitalisation, and rising activity in finance and insurance. The Bank expects services to remain the largest contributor to GDP expansion in 2026.
FX reforms strengthen buffers as reserves head toward $51bn
The growth outlook is reinforced by improving external sector dynamics. Nigeria’s external reserves are projected to rise to $51.04 billion in 2026, from an estimated $45.01 billion at end-2025, supported by higher oil receipts, expanding non-oil exports, steady remittance inflows, and stronger portfolio and direct investment flows.
A key indicator of progress highlighted in the Outlook is the sharp convergence between official and parallel market exchange rates. The premium between the Nigerian Foreign Exchange Market (NFEM) and Bureau de Change (BDC) rates narrowed to about 2% in late 2025. This is down sharply from previous years, reflecting improved price discovery and reduced arbitrage.
The CBN attributed the convergence to FX market reforms. These include adoption of a market-determined exchange rate, the Electronic Foreign Exchange Matching System, revised IMTO guidelines, and stronger FX market governance. For investors, narrowing FX spreads reduce currency risk and improve capital repatriation confidence. It also lowers Nigeria’s sovereign risk premium.
Bank recapitalisation and tax reform anchor stability
Beyond cyclical gains, the Outlook identifies bank recapitalisation and the Nigeria Tax Act, effective January 2026, as twin structural pillars underpinning macroeconomic stability.
The banking sector recapitalisation programme is designed to strengthen capital buffers and enhance resilience. It also aims to expand banks’ capacity to finance large-scale projects in infrastructure, energy, and manufacturing.
The CBN expects recapitalisation to deepen credit intermediation, support economic diversification, and strengthen confidence in the financial system. These events have implications for equity markets and potential banking consolidation.
At the same time, the Nigeria Tax Act is expected to broaden the tax base, improve compliance, and raise non-oil revenue. This reduces dependence on volatile oil receipts. The Act aims to harmonise tax administration and strengthen fiscal sustainability, helping to narrow deficits over time and reduce pressure on borrowing.
Together, these reforms anchor the macro framework by linking stronger banks with a more predictable fiscal regime—key conditions for sustained private investment.
Investor implications and remaining risks
For investors, the Outlook’s message is one of cautious optimism. Faster growth, declining inflation, FX stability, and structural reforms reduce uncertainty. They also improve medium-term visibility for Nigerian assets. Equity markets stand to benefit from stronger earnings prospects, while improved FX dynamics support fixed-income and portfolio flows.
However, the CBN cautioned that risks remain, including potential oil production disruptions and fiscal slippages—particularly in the pre-election period. Global commodity price volatility and renewed inflationary pressures if reform momentum slows are also concerns.
Why it matters
An acceleration of growth to 4.49%, combined with stronger reserves and institutional reforms, would mark a meaningful step toward a more resilient Nigerian economy. If sustained, the mix of oil output recovery, domestic refining, FX stability, and structural anchors could shift Nigeria onto a more stable growth path. This would make it less vulnerable to shocks and more attractive to long-term investors.