CFG Advisory has warned that all financial gains from the removal of fuel subsidies are now being channelled into debt servicing, leaving little fiscal space for development spending and social interventions, while calling for an urgent downward review of the 2026 budget for realistic implementation.

The firm made this known at the monthly forum of the Finance Correspondents Association of Nigeria (FICAN), where it unveiled its 2026 economic outlook titled “Nigeria 2026 Economic Forecast: The Urgency of Now – Reforms Lead to Productivity-Led Growth.”

Speaking at the event, the Chief Executive Officer of CFG Advisory, Tilewa Adebajo, said Nigeria’s current debt profile, estimated at over $100 billion, had become unsustainable. He noted that the 2026 budget proposes ₦15.52 trillion for debt servicing, a figure higher than the combined allocations to security, defence, education and health, which stand at ₦14.97 trillion.

According to him, excessive fiscal spending, massive budget deficit and the failure of social intervention programmes have left households and businesses deeply frustrated, with the economy showing clear signs of stagflation.

“The entire benefit of fuel subsidy removal is now being absorbed by debt service. This leaves the government with very limited room to address growth, infrastructure, or social protection,” Adebajo said.

CFG Advisory further warned that the prospect of elections in 2026 adds uncertainty to economic management, as political considerations may overshadow difficult but necessary reforms.

However, it noted that improved military cooperation with the United States could help Nigeria address its persistent security challenges.

The report stressed that sustainable growth would depend on better coordination of monetary, fiscal, investment, trade and industrial policies, backed by strong political will and the empowerment of the country’s economic management team to implement deliberate growth-oriented reforms.

It stated that Nigeria is at a critical juncture and requires sustainable disinflation and productivity-driven growth policies supported by structural reforms to enhance productivity, create jobs and stimulate industrial development. The government’s repeated failure to adequately finance capital budgets, traditionally a major driver of economic growth, was identified as a major weakness.

CFG Advisory also referenced recent warnings by the World Bank and the International Monetary Fund against Nigeria’s current pace of budget expansion, which stands at 56 percent year-on-year. Both institutions have advised aligning budget growth with realistic revenue projections to avoid worsening fiscal pressures.

The firm called for urgent fiscal reforms, including aligning the Fiscal Responsibility Act with Nigeria’s current debt profile and deficit realities to ensure long-term debt sustainability. It recommended restructuring the Federal Government’s balance sheet by optimising equity within its capital structure through asset sales, privatisation and concessions.

In particular, CFG Advisory urged the Federal Government to sell down to at least 49 percent of its interests in the 74 licensed concession assets to raise about $50 billion. The proceeds, it said, should be used to improve government revenues, restructure and recapitalise the Nigerian National Petroleum Company Limited (NNPC), and reduce the national debt burden.

It also recommended consolidating NNPC’s oil forward contracts into a structured debt instrument to improve transparency, accountability and debt management.

With these measures in place, the firm said Nigeria could revive investment in the oil and gas sector, which has fallen sharply from about $22 billion in 2009 and 2014 to less than $3 billion in 2024. It is projected that renewed investment could help ramp up crude oil production to 2.5 million barrels per day, improving revenue sustainability and foreign exchange availability.

Despite its concerns, CFG Advisory projected a relatively optimistic outlook for 2026, forecasting 5 per cent GDP growth, single-digit official inflation, a Monetary Policy Rate below 20 per cent, and an exchange rate trading between ₦1,400 and ₦1,500 to the dollar.

It noted that Nigeria’s GDP was recently rebased to about $280 billion, causing the country to drop from the largest to the fourth-largest economy in Africa. GDP growth stood at 3.98 per cent in the third quarter of 2025, down from 4.23 per cent in the previous quarter, and remains far below the 8–10 per cent growth rate required to lift millions out of poverty.

The firm also called for the restoration of social intervention programmes “to give reforms a human face” and urged the Central Bank of Nigeria to consider cutting interest rates to stimulate economic growth.

“Government must articulate and implement deliberate disinflation and growth policies, targeting 8–10 per cent GDP growth to support productivity, employment, exchange rate stability, industry and investment,” the report concluded.

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