Uche Olowu: FG Should Monitor Progress, Tweak New Tax Laws Where Necessary

Former President of the Chartered Institute of Bankers of Nigeria, Dr. Uche Messiah Olowu believes that with its implementation, public expectations from Nigeria’s new tax laws are high, saying that this is the moment the government must resist complacency and deepen discipline. In his view, the new tax laws should not be treated as finished products. They must be tracked, measured and refined to ensure they support productivity rather than squeeze businesses and households already under pressure. Olowu argues further that meaningful economic growth will remain elusive unless there is genuine coordination between fiscal authorities and the Central Bank of Nigeria as monetary policy cannot be fighting inflation while fiscal policy fuels deficits and inefficiencies. Likewise, revenue mobilisation must move alongside transparency, spending efficiency, and targeted support for the vulnerable. Only then can reforms translate into jobs, stability, and investor confidence. Speaking with Nume Ekeghe, Olowu reflects on the lessons from 2025, the outlook for 2026, and the urgent need for coherent policies that move beyond rhetoric to deliver tangible benefits for Nigerians. Excerpts:

Looking back at 2025, how would you characterise the performance of the Nigerian economy?

In my personal view, Nigeria had a remarkable performance in 2025 as we started seeing the effects of the reforms begin to impact fully on the general economy, with strong expansion driven by various sectors. From what we saw and the statistics available to us, the composite Purchasing Managers’ Index, which shows the level of activities in the economy, rose to 57.6 index points in December 2025, which was evidence of a broad-based increase in aggregate economic activities. We were also told by the National Bureau of Statistics, that the Gross Domestic Product (GDP) growth, started from 3.13 per cent in the first quarter to 4.23 per cent in quarter two, even though in quarter three it slowed to about 3.98 per cent and these were driven by growth in services, the non-oil sector, a rebound in oil production, and also agriculture activities as occasioned by the reduction in insecurity to some extent. We also saw the forex reserves increase and hover above $42 billion, a current account surplus of about 6.1 per cent, traceable to a reduction in oil imports occasioned by the Dangote Refinery and, of course, expansion of non-oil exports. Basically, you want to say that overall there has been good growth driven by improved demand, private sector investment, and moderate inflation due to the ongoing reforms. So we expect non-oil sectors, services, agriculture and industry to continue to improve.

Inflation remained a major concern despite the rebasing. What were the biggest drivers in 2025?

I think food inflation, basically due to food insecurity, which impacted logistics costs. Food inflation moderated to about 11.08 in November, but before now it was about 39.3 per cent, and also energy prices. So basically, insecurity, food, and energy costs are the basic drivers that made inflation remain a concern in spite of rebasing.

What do you think should be done to attain the CBN’s inflation forecast to average around 12.94 per cent next year?

For full-blown economic activities to take place, they must happen in a secure and conducive environment. So we have to address insecurities. Luckily enough, I’m hearing that bandits and terrorists are having a shift because of recent activities in Sokoto State. So if we can address security and farmers can go to their farms, and with a reduction in energy costs, which the Dangote Refinery has helped, you will see that, yes, it is achievable. Then, going by the tight monetary stance of the Central Bank, the monetary policy, we should be able to say that it is achievable.

How effective do you think the Central Bank’s monetary tightening stance was in 2025, and what would you have done differently?

I think we should give kudos to the current regime at the Central Bank. The approach and policies were quite effective in moderating inflation and, above all, stabilising the naira. Aggressive interest rate hikes, with the Monetary Policy Rate (MPR) peaking at 27 percent, helped curtail inflationary pressures, bringing headline inflation down to about 16.05 percent in October and 14.45 percent in November. We have seen a decline in inflation for seven consecutive months, supported by stable exchange rates and improved food supply. We also saw a stable Naira, trading around N1,500 to the dollar, and forex reserves rose to about $46.7 billion. That boosted improved export receipts and capital inflows. We saw some big capital inflows, although some people say it was because of bond sales; but we saw some significant capital inflows into our FX reserves, coupled with an increase in oil production. The downside of the monetary stance was that access to credit for small and medium enterprises was potentially limited. Interest rates were high, and small and medium enterprises (SMEs) don’t survive in a high-interest-rate environment. So, access to capital was a constraint to the economic growth; we should have seen the full impact of recent policies. But overall, I think we saw a positive trajectory.

As we enter 2026, what are your expectations for interest rates and exchange rate stability?

I expect that we will continue to see exchange rate and interest rate stability. From my perspective, it looks positive. The CBN projects maintaining a stable exchange rate, with the naira trading between about N1,451 and N1,400 to the dollar. This should be accompanied by improved government revenue with the new tax laws, and coupled with crude oil production, where we have seen a stable rise. If they manage excess volatility, especially as a result of pre-election activities, I expect moderate positive trends in the next six months, with interest rates around 20 to 25 per cent.

From the fiscal side, do you believe government spending in 2025 was growth-supportive, or did it lean more toward consumption and recurrent costs?

I would say government spending had elements of both growth support and recurrent costs. The budget, if you recall, was about N54 trillion, out of which a significant portion, about N24 trillion, was for Capital Expenditure (CapEx), showing a focus on growth, enhancing investment and infrastructure like roads and power, even though we are yet to see significant improvement. Investment in CapEx and human capital development, health, and education attracted a large chunk. However, recurrent expenditure, including huge debt servicing of about N14.32 trillion and personnel costs, also took a chunk. So all in all, the spending intent was aimed at stimulating growth, but recurrent costs and debt servicing constrained fiscal space.

Going into 2026, what should be the number one fiscal policy priority?

The priority should be security and infrastructure. In terms of roads and especially power, I don’t know why it is difficult to resolve power issue. We could do modular solutions, a more structured approach, and transparency in the power sector to allow investments. If we focus on roads, power, and energy, we will see tremendous growth in the economy, especially supporting SMEs, agriculture, and mechanisation.

Nigeria’s debt service burden continues to worry analysts. What is your take on that?

If you look at the ratios, it is a concern, no doubt. But our debt-to-GDP ratio declined from about 39.3 per cent to 36.4 per cent in 2025, and it is projected to further decline to about 35 per cent in 2026, according to the Central Bank. This trajectory indicates gradual improvement in the debt sustainability outlook, driven by fiscal consolidation measures, improved revenue generation and intent to grow the economy. Concerns remain about increases in global interest rates, because we are heavily exposed to the global economy. Rising interest rates will constrain government budgets, and debt servicing could crowd out development spending.

The new tax laws have come into effect, and many businesses have raised concerns. What is your take on the raging debate about the tax laws, especially with the allegation that the laws were altered?

The tax laws were aimed at harmonising tax rules to boost revenue and support economic growth. From what we understand, a greater chunk of lower-income earners will see their tax burden reduce significantly, while the tax base is broadened so businesses pay their fair share. Concerns range from higher taxes impacting business operations and raising costs in a fragile economy. That is true. But it will also spur investment in infrastructure that will boost economic activities. My concern, however, is implementation and transparency in dealing with government revenue. The key issue is execution and making sure resources are put into the right areas, infrastructure that benefits the economy. I think we should give it a chance.

What safeguards should accompany these new tax measures to avoid discouraging investment, job creation and SMEs?

We should phase the rollout to ease the compliance burden, give tax breaks and incentives to SMEs, and streamline tax administration to make it simple, transparent and clear. A digital platform is very important to reduce bureaucracy, ease compliance and reduce corruption. There must also be fairness and predictability, clear thresholds so people know exactly what they are due to pay. Communication is key. Changes should be communicated timely. Capital hates surprises. Finally, monitoring and evaluation are critical. As implementation progresses, the government should evaluate the impact and tweak policies where necessary to ensure success.

How can the government balance the need to raise revenue with citizens’ demand for visible value in terms of roads, power, healthcare, and education?

Raising taxes is designed to ensure that you get more revenue, and then this revenue should be brought back to strategic projects, phased in a way that there is some level of transparency in execution. We should be able to focus on high-impact infrastructure like power, roads, health and education, so that revenue is deployed back to those high-impact sectors that will uplift the standard and quality of living in the economy. We must reduce corruption and ensure value for money in our spending, because it is one thing to collect revenue and another thing for some politicians in Abuja to begin to spend the money through one phony project or the other. Fiscal discipline is very important. Value for money in spending should be seriously emphasised. Clear communication is also key. Take, for example, the food belt; there is a need for railways to those areas so that agricultural products can be evacuated, reducing costs to the common man and increasing productivity. Once you communicate to the masses why a project will benefit them and how the money raised is being used, you begin to see buy-in. For me, the real areas to focus on are critical road maintenance, energy access, the upgrade of healthcare facilities, and digital infrastructure. We are in the age of Artificial Intelligence, so digital infrastructure to drive services and technology is also worth investing in. As we plug the money raised into these critical sectors, what has happened in other countries can happen here. A good example is Rwanda and our neighbouring Ghana, where they have been able to balance fiscal discipline by channeling scarce revenue into critical infrastructure that drives economic growth. That is how you raise money and, in turn, give citizens quality of life.

If you were advising the monetary and fiscal authorities jointly, what coordinated reforms would you insist on to avoid policy contradictions?

The key point here is policy alignment and harmonisation. Monetary and fiscal authorities should harmonise inflation targets, fiscal deficit financing and economic growth goals. There should be clear coordination between fiscal and monetary policy in the area of harmonising inflation targets and fiscal deficit planning, because that also has a way of affecting inflation. There should be a thorough handshake between both authorities so that every policy action is targeted towards the same economic growth goals. Borrowing strategies should be clearly communicated, focusing on concessional loans. The Central Bank should focus on core inflation, while fiscal authorities should focus on policy support in areas like food security, energy efficiency, improving tax collection and broadening the tax base. Structural reforms should also align tariffs with local industry needs. Tariffs should not discourage investment in local industries or make it difficult for them to compete. Fiscal discipline and data sharing are very important. These are areas policy alignment should focus on.

2026 is effectively a pre-election year. Historically, spending rises and discipline weakens. What risks do you foresee, and how can they be managed?

Pre-election periods usually come with increased spending. You begin to see a lot of money being pushed into the economy in an attempt to canvass support. If not carefully managed, this can fuel inflation. Institutional authorities charged with managing the economy should not drop the ball at this time. The Central Bank, especially, should maintain its tight monetary stance and ensure that excess liquidity does not flood the economy. As more money is injected, inflationary pressures will rise, so policy discipline is critical. Authorities must ensure resources are properly channelled, leakages are plugged, and revenue mobilisation is improved. Channelling resources into healthcare, education and infrastructure can help stabilise the economy. Macroeconomic stability and fiscal discipline are what will check excessive spending.

How can policymakers maintain investor confidence in a politically charged environment, while still addressing social pressures at home?

Policymakers must clearly communicate policy direction and plans. Investors want to know where the country is heading. Continuous communication to assuage investors about policy direction is very important. They should institute business-friendly reforms, improve ease of doing business, provide tax incentives and show commitment to tackling corruption. Above all, investors want to see macroeconomic stability, how we manage inflation, stabilise the naira, and build reserves. I must commend the CBN; they had their role cut out, and they have been diligently doing that. There must also be commitment to fiscal discipline and debt sustainability, and a clear message that Nigeria remains focused on diversifying the economy, especially through non-oil sector growth. Support for agriculture, manufacturing, and the digital economy should be clearly communicated. Nigeria has the human capital to drive the digital economy, and investment in digital infrastructure like optical fibre is very important. These are the areas that show seriousness about moving the economy forward.

Finally, in one sentence, what is your outlook for the economy in 2026?

The trajectory is looking upwards, and all we need is to put our acts together and go for the best.