How the reforms started

Over two years ago, the Tinubu administration and the CBN under Governor Olayemi Cardoso liberalised the foreign exchange market, ended central bank financing of the fiscal deficit, and reformed fuel subsidies. The government also strengthened revenue collection and moved to curb inflation.

Since then, international reserves have risen and access to foreign exchange in the official market has improved. Nigeria returned to the international capital markets in December 2025 and received credit rating upgrades. A new private refinery is also positioning the country higher in the value chain in a deregulated market.

The CBN’s currency reforms have drawn foreign investment inflows and reduced direct interventions in the forex market. Unifying exchange rates and clearing over $7 billion in FX backlogs improved Nigeria’s investment outlook. The World Bank described the move as a bold step toward long-term sustainability.

Nigeria’s sovereign risk spread has since fallen to its lowest level since January 2020, erasing the pandemic-era premium.

Policy focus and outlook

Governor Cardoso said collaboration between fiscal and monetary authorities is key to managing inflation and maintaining investor confidence.

“Managing disinflation amidst persistent shocks requires robust policies and coordination to anchor expectations. Our focus remains on price stability, the planned shift to an inflation-targeting framework, and restoring purchasing power,” he said.

The CBN has also moved to strengthen the banking sector with new minimum capital requirements effective March 2026, aimed at building resilience for a $1 trillion economy.

“As we shift from unorthodox to orthodox monetary policy, the CBN is committed to restoring confidence, strengthening credibility, and staying focused on price stability,” Cardoso said.

The Monetary Policy Committee recently lowered the policy rate, citing five months of sustained disinflation and projections of further decline through 2025, alongside the need to support recovery.

Capital inflows and banking sector health

Cardoso said Nigeria now receives about $600 million monthly in diaspora remittances. He added that spillover effects have been contained, reflecting gains in exchange rate stability, stronger reserves, and an improved monetary policy framework.

The banking sector remains sound. The non-performing loan ratio stays within the 5% prudential benchmark, and the liquidity ratio exceeds the 30% regulatory floor. Recent stress tests confirmed the system’s strength.

A significant number of banks have raised capital through rights issues and public offerings ahead of the 2026 deadline, putting the sector in a stronger position to fund MSMEs and key sectors.

Rising foreign capital inflows

Cardoso recently announced that Nigeria makes roughly $600 million monthly from diaspora remittance inflows to the economy.

He said Nigeria’s experience indicates that spillover effects have been relatively contained reflecting positive reform outcomes, including exchange rate stability, stronger reserve offers and an enhanced monetary policy framework.

He said recent gains, including lower inflation, FX market stability and stronger reserves, have boosted investor confidence and capital flows.

Cardoso earlier explained that within the banking sector, the sector remains robust with key indicators reflecting a resilient system.

“The non-performing loan ratio remains within the prudential benchmark of five per cent, showcasing strong credit risk management. The banking sector liquidity ratio comfortably exceeds the regulatory floor of 30 per cent, a level which ensures banks are maintaining adequate cash flow to meet the needs of customers and their operations. The recent stress test conducted also reaffirmed the continued strength of our banking system,” he said.

To ensure that our banking system can effectively support the growth of our economy, efforts to strengthen banks’ capital buffers were announced in 2023 with a two-year implementation window.

“I am pleased to note that a significant number of banks have raised the required capital through right issues and public offerings well ahead of the 2026 deadline! I believe that the banking sector is in a strong position to support Nigeria’s economic recovery by enabling access to credit for MSMEs and supporting investment in critical sectors of our economy,” he said.

Cardoso explained that the banking sector remains robust, with key indicators reflecting a resilient system.

“The non-performing loan ratio remains within the prudential benchmark of five per cent, showcasing strong credit risk management. The banking sector liquidity ratio comfortably exceeds the regulatory floor of 30 per cent, a level which ensures banks are maintaining adequate cash flow to meet the needs of customers and their operations. The recent stress test conducted also reaffirmed the continued strength of our banking system,” he said.

“I am pleased to note that a significant number of banks have raised the required capital through rights issues and public offerings well ahead of the 2026 deadline. I believe that the banking sector is in a strong position to support Nigeria’s economic recovery by enabling access to credit for MSMES and supporting investment in critical sectors of our economy,” he said.

Growth outlook

The World Bank upgraded Nigeria’s growth forecast for 2026 to 4.4%, up from 3.7% in June 2025. It expects growth to hold at 4.4% in 2027, driven by services, a rebound in agriculture, and modest gains in the non-oil industry.

“Economic reforms, including in the tax system, along with prudent monetary policy, are expected to support activity, improve investor sentiment, and reduce inflation further,” the report said.

Higher oil output is also expected to offset lower prices and boost fiscal revenue and the external balance.

The CBN’s own 2026 macroeconomic outlook projects 4.49% growth, citing gains from structural reforms and a gradually easing monetary stance.

The World Bank says Sub-Saharan Africa would achieve 4.1 per cent growth this year. It also listed risks stalling growth in the region.

In Africa Economic Update, it said geopolitical risks—including the conflict in the Middle East, high debt service burdens and longstanding structural constraints, continue to weigh on the region’s capacity to accelerate growth and create jobs.

The report, formerly titled Africa’s Pulse, finds that growth for 2026 in Sub-Saharan Africa is holding at 4.1 per cent, the same pace as in 2025, but downside risks are mounting. Rising fuel, food, and fertilizer prices, alongside tighter financial conditions, are likely to push inflation higher, disrupt economic activity, and disproportionately affect the most vulnerable households which spend a larger share of their income on food and energy.

“In the short term, governments should target scarce resources to protect the most vulnerable households. At the same time, maintaining macroeconomic stability—by controlling inflation and exercising prudent fiscal management—will be essential to navigate the current shock and position African countries for a faster recovery once the crisis subsides,” said Andrew Dabalen, World Bank Group Chief Economist for the Africa Region.

The bank said sub-Saharan Africa’s economic recovery from a decade of global shocks is showing signs of stalling, with growth projections for 2026 revised downward by 0.3 percentage points from estimates previously published in October 2025, according to the latest edition of the Africa Economic Update, the World Bank Group’s biannual economic report for the region.

High public debt and rising debt service costs continue to limit countries’ ability to fund development priorities and invest in foundational infrastructure needed to create more and better jobs.

The Global Economic Prospects report, the World Bank upgraded Nigeria’s economic growth forecast for 2026 to 4.4 per cent, from the 3.7 per cent projection it had announced for the country in June 2025.

The report said: “Growth in Nigeria is forecast to strengthen to 4.4 percent in both 2026 and 2027—the fastest pace in over a decade. This further firming of growth is anticipated to be underpinned by a continued expansion in services and a rebound in agricultural output, with a modest acceleration in non-oil industry.

“Economic reforms, including in the tax system, along with continued prudent monetary policy, are expected to continue supporting activity. They are also expected to improve investor sentiment and reduce inflation further.

Higher oil output is expected to offset lower international oil prices this year, helping to boost fiscal revenues and strengthen the external balance.”

The apex bank appeared to have set the ball rolling in terms of forecasting positive economic outlooks for the country, when in its macroeconomic outlook for 2026, released last month, it made optimistic projections for the nation’s economy.

The apex bank stated: “The year 2026 presents a realistic window of opportunity for macroeconomic stabilisation. The Nigerian economy is expected to continue expanding, with growth projected at 4.49 per cent in 2026. The projection is hinged on continued gains from broad-based structural reforms and a gradually easing monetary policy stance.”

Regional and global context

For Sub-Saharan Africa, the World Bank forecasts 4.1% growth in 2026, unchanged from 2025, but warns that rising fuel, food, and fertilizer prices, along with tighter financial conditions, could push inflation higher.

The IMF noted that oil and gas exporters like Nigeria face smaller headwinds from the Middle East crisis if exports remain uninterrupted. IMF Managing Director Kristalina Georgieva said the conflict has disrupted flows and darkened the global outlook, but the burden is uneven across countries.

A report: “How the Middle East War Has Affected Oil Exporters and Importers”, released at the weekend, explained her position, highlighting that countries directly hit by the conflict, including major oil and gas exporters in the Middle East, bear the brunt of the impact.

The report explained that countries face vastly different exposure to higher oil prices and supply uncertainty, shaped by whether they import or export, and how much policy space they have to respond.

Already, the war in the Middle East has disrupted oil and gas flows and darkened the global economic outlook.

“So, do oil-importing nations where imports loom large as a share of gross domestic product. How severe that burden becomes for these importers depends critically on their policy space, proxied in the charts below by their sovereign credit ratings,” the report said.

Explaining that most countries are net oil importers, the Fund said the war’s direct hits have fallen heavily on exporters, adding that the shock is global, but the burden is uneven.

In her Spring Meetings curtain raiser speech, Georgieva, said a resilient world economy is being tested again by the war in the Middle East.

“The conflict has caused considerable hardship around the globe. My heart goes out to all people affected by this war and all wars.

Our focus remains on how best to weather this latest shock and ease the pain on economies and people. This requires understanding the nature of the shock, the channels through which it affects the economy, the size of the impact, and the policies that can mitigate it,” she said.