FX Reserves to Surpass $51 Billion by 2026 — CBN Report
Economic Projections and Outlook for Nigeria in 2026
The Central Bank of Nigeria (CBN) has released its Macroeconomic Outlook for 2026, titled “Consolidating Macroeconomic Stability Amid Global Uncertainty.” This report outlines the bank’s expectations for various economic indicators, including external reserves, inflation, and monetary policy. The CBN anticipates that external reserves will increase to $51.04 billion in 2026, up from $45 billion in 2025.
As of December 29, 2025, Nigeria’s external reserves stood at $45.45 billion, following a period of steady growth. The projection for 2026 is based on several factors, including reduced pressure in the foreign exchange (FX) market, anticipated increases in oil earnings, sovereign bond issuance, and diaspora remittance inflows. Additionally, the expansion of the Dangote Refinery’s nameplate capacity to 700,000 barrels per day (bpd) from 650,000 bpd in 2025, and eventually to 1.4 million bpd in the medium term, is expected to further support the growth in external reserves.
Enhancing FX Market Efficiency
The CBN highlighted ongoing reforms in the FX market aimed at improving efficiency and transparency. These reforms are expected to narrow the premium between the Nigerian Foreign Exchange Market and Bureau de Change rates, as well as sustain exchange rate stability. Improved domestic oil refining capacity is also anticipated to reduce foreign exchange demand for fuel imports.
Inflation Trends and Outlook
Inflation is projected to continue its downward trend in 2026, with headline inflation expected to decelerate to 12.94% in 2026 and further drop to 10.75% in 2027. This decline is attributed to a combination of factors, including the base-year effect, improved policy coordination, and the lagged impact of previous rate hikes. Data from the National Bureau of Statistics indicates that inflation has been falling for consecutive months, with headline inflation dropping to 14.45% in November 2025 from 16.05% in October 2025. However, the Consumer Price Index rose to 130.5 points in November from 128.9 points in October, reflecting a 1.6-point increase.
The CBN noted that the decline in food and premium motor spirit (PMS) prices will drive the moderation in inflation. Increased competition within the midstream segment of the oil industry is expected to contribute to the faster decline in PMS prices. Meanwhile, the expected increase in food supply due to agriculture sector policies, improved security in major food-producing regions, and favorable weather conditions will help slow the pace of inflation.
Monetary Policy and Fiscal Conditions
Monetary policy in 2026 is expected to remain relatively loose, given the macroeconomic stability observed in 2025. The CBN will use appropriate tools to anchor inflation expectations, foster financial stability, and promote confidence in the economy. The trajectory of monetary aggregates in 2026 will be influenced by external conditions and fiscal operations. Changes in the naira value of foreign currency deposits, driven by exchange rate movements, will continue to affect monetary aggregates. However, the CBN’s policy stance, along with measures to stabilize the FX market, is expected to moderate the growth rate of monetary aggregates.
On the fiscal front, the outlook for 2026 is broadly positive, supported by sustained improvements in domestic crude oil production and the phased implementation of the Nigeria Tax Act, 2025. This act is expected to strengthen non-oil revenue mobilization. However, downside risks persist, including a potential decline in global oil prices and unexpected reductions in oil production. Elevated debt service obligations, extra-budgetary spending, and pre-election spending could further constrain fiscal space.
Financial Sector Challenges
The CBN expressed concerns about rising non-performing loans (NPLs) and their impact on banks. Rising NPLs pose a direct threat to banks’ profitability, credit availability, and overall risk-bearing capacity. The bank emphasized the need to sustain measures to prevent worsening NPLs from weakening banks’ balance sheets or triggering systemic contagion. While recent gains in capital adequacy and liquidity ratios provide a buffer, these indicators remain vulnerable to unforeseen macroeconomic shocks.
An increase in credit losses or foreign exchange illiquidity could erode capital reserves, breach prudential thresholds, and strain liquidity coverage. These conditions could disrupt financial intermediation, diminish market confidence, and amplify vulnerabilities across the banking sector.
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