•Targets 12.94 percent average inflation, N1,400/US$ in 2026

Monetary conditions in Nigeria are expected to remain relatively loose in 2026, supported by improved macroeconomic stability recorded in 2025 and a gradual easing of inflationary and foreign exchange pressures, according to the Central Bank of Nigeria (CBN).

In its 2026 macroeconomic outlook titled “Consolidating Macroeconomic Stability amid Global Uncertainty”, the apex bank said it would sustain the deployment of policy tools to anchor inflation expectations, strengthen financial stability, and deepen confidence in the economy, even as key risks show signs of moderation.

The CBN projected headline inflation to ease significantly to an average of 12.94 percent in 2026, driven largely by declining food prices and lower premium motor spirit (PMS) costs. The bank also projected improved foreign exchange stability, with the Nigerian Foreign Exchange Market (NFEM) exchange rate expected to average 1,400/US$ in 2026, compared with an estimated 1,451.63/US$ in the fourth quarter of 2025.

The outlook is based on expectations of a more efficient foreign exchange market, stronger capital inflows, a sustained current account surplus, and broader improvement in economic activity.

Analysts say the projections suggest a gradual departure from the aggressive tightlined much of 2024 and early 2025, as policymakers focus more on stabilising liquidity conditions and consolidating investor confidence.

The apex bank noted that monetary aggregates in 2026 will be shaped by both external conditions and domestic fiscal operations, while exchange rate movements will continue to influence the naira value of foreign currency deposits and overall money supply trends.

“Changes in the naira value of foreign currency deposits, arising from exchange rate movements, will continue to influence monetary aggregates,” the bank stated.

However, it added that its policy stance, complemented by continued efforts to stabilise the foreign exchange market, is expected to moderate the growth rate of monetary aggregates in 2026.

According to the projections, broad money supply (M3) growth is expected to remain subdued at 8.12 percent in 2026, marginally lower than the estimated 8.16 percent in 2025 and far below the 43.03 percent growth recorded in 2024.

Narrow money (M1) is projected to rise by 8.12 percent in 2026, recovering from 1.88 percent in 2025 but still significantly lower than the 28.86 percent recorded in 2024.

Net Foreign Assets (NFA), a major driver of liquidity, is forecast to expand by 52.90 percent in 2026, after an estimated 42.14 percent increase in 2025. In contrast, Net Domestic Assets (NDA) is expected to contract further by 9.47 percent in 2026, following a 5.18 percent decline in 2025. The monetary base is also projected to grow by 12.56 percent in 2026, slightly below the 13.81 percent estimated for 2025, reflecting continued efforts to manage liquidity expansion.

The capital market is also projected to maintain a bullish momentum in 2026, supported by the ongoing banking sector recapitalisation exercise and other reforms aimed at deepening participation and improving liquidity. The CBN cited measures such as the Nigerian Exchange’s technology strategy, its collaboration with the Federal Ministry of Industry, Trade and Investment, the zero percent capital gains tax for small businesses, and the 150 million exemption threshold for retail investors.

Despite the positive outlook, the bank cautioned that unanticipated shocks in the global economy could weaken investor sentiment.

On fixed income markets, the CBN projected a lower yield curve trend in 2026 compared with 2025, but noted that the short end of the curve could remain above the long end, producing an inverted yield curve. The bank attributed this to expectations of lower interest rates in the future, improving liquidity conditions, and the disinflationary outlook consistent with growth.

The fiscal outlook for 2026 was also described as optimistic, supported by sustained non-oil revenue mobilisation and continued implementation of the Nigeria Tax Act, 2025. The CBN projected federal government retained revenue and expenditure at 35.51 trillion and 47.64 trillion, respectively, resulting in a provisional fiscal deficit of 12.14 trillion, representing 3.01 percent of GDP. Public debt is projected to rise slightly to 34.68 percent of GDP by end-2026, compared with 33.98 percent as of June 2025.

Externally, Nigeria’s current account surplus is projected to rise to US$18.81 billion, supported by strong exports, steady remittances, increased oil and gas output, improved domestic refining capacity, and rising global demand. External reserves are expected to climb to US$51.04 billion, while the international investment position is projected to remain in a net borrowing position of US$69.58 billion.

The CBN warned, however, that risks remain. These include possible inflation surprises if fiscal spending rises sharply, sudden capital reversals that could trigger exchange rate volatility, disruptions to crude oil production, and unfavourable climatic conditions that may affect output. The bank also cautioned that rising non-performing loans and concentration risks from recapitalisation could weaken the financial system.

It said it would maintain a careful balance between price stability and output growth in 2026, while deploying measures to attract foreign investment, strengthen the foreign exchange market, deepen the GSI framework, and tighten cybersecurity regulations across the financial system.

Copyright © 2026 Nigerian Tribune Provided by SyndiGate Media Inc. (Syndigate.info).