Nigeria’s gross domestic product (GDP) is expected to enlarge by 4.3 per cent in 2026, backed by expanding services, a steady improvement in oil and non-oil exports as well as increased macro stability and investor confidence, according to a new report by PricewaterhouseCoopers (PwC).
The professional services firm is taking a more optimistic view of Nigeria’s economic performance this year, compared to 2025, for which it projected a 3.3 per cent growth, as it anticipates gradual easing of monetary policy rate to strengthen Nigeria’s refinancing conditions.
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Africa’s biggest oil producer cut is reference interest rate by 50 basis points to 27 per cent last September, its first rate reduction since 2020, following sustained deceleration in inflation, which touched a 28-year high in 2024.
Analysts expect the downward trend in price levels to prompt the Central Bank of Nigeria to lower rates further this year to support growth and enhance credit expansion.
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PwC is betting that Nigeria’s GDP growth will outperform the global average, which it put at 3.1 per cent, and that of the West African region, which it estimated at 4.1 per cent.
The report highlighted seven key trends that will define the Nigerian economy in 2026. They include monetary policy effectiveness, global dynamics and geopolitics, fiscal sustainability and reform execution, uneven sectoral growth, limited consumer purchasing power, domestic security and social stability pressures, and stronger momentum in the emergence of the digital economy and AI.
“Subdued global and regional trade may limit Nigeria’s non-oil export growth, particularly within West Africa, where trade disruptions and border frictions persist,” the report, titled “2026 Nigeria Economic Outlook: Turning Macroeconomic Stability into Sustainable Growth,” it stated.
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“Oil prices, capital flows, and external financing conditions, alongside regional trade stability, are likely to remain dominant drivers of Nigeria’s GDP growth and FX liquidity,” it added.
The report noted that the implementation of the Nigeria Tax Act 2025, which came into force this month, will shape the 2026 fiscal outlook and transform the revenue landscape as the country aspires to attain a tax-to-GDP ratio of 18 per cent by 2027.
Inflation
PwC warned that despite a slowdown in inflation, which stood at 14.5 per cent in November, residual price shocks could wear away the real value of spending.
It foresees that inflation will decline further in 2026, driven by FX stability, policy consistency and increased agricultural output. That said, the report highlighted pre-election fiscal pressures, global energy shocks and insecurity in food-producing regions as potential risks.
Imported inflation, it observed, could grow worse during the year due to capital flow reversals and geopolitical tensions, which may strain FX reserves and weaken the naira.
The report also remarked that disinflation is likely to support demand for manufactured goods.
Exchange rate
With the 2026 budget assuming an average exchange rate of 2026, the report stated that FX headwinds are a major risk, considering that a considerable share of obligations is denominated in foreign currency, and depreciation will shoot up the naira cost of servicing external debt and other FX-related commitments.
Oil has been projected at $55 per barrel in 2026, which means that a slide in oil price below this level may weaken government revenue and FX inflows, heightening the pressure on the exchange rate, the report noted.
PwC expects the naira to be broadly stable throughout the year, aided by ongoing economic reforms and improved portfolio inflows. It is upbeat that exchange rate stability will be supported by positive current account balance, sustained FX inflows and continued policy transparency.
Debt service
Debt service, budgeted at N15.5 trillion in 2026, is set to gulp almost half of the government’s projected revenue for the year. The report warned that it could constrain the fiscal space for growth and social expenditures.
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Generally, debt pressures are anticipated to subside during the year, with debt service projected to constitute 26.7 per cent of expenditure.
According to the report, a higher domestic interest rate could result in rising debt-service costs, consequently tightening the fiscal space.
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