PWC: Tax Reforms, Execution Discipline, Institutional Measures to Define 2026 Fiscal Outlook

• Projects cautious monetary easing

Dike Onwuamaeze

PwC, a global professional services company, has declared that tax reforms, execution discipline, and institutional measures would define Nigeria’s 2026 fiscal outlook.

The PwC made these projections in a January 2026 publication titled, “2026 Nigeria Economic Outlook Turning Sacroeconomic Stability into Sustainable Growth,” in which it stated that “poverty level is projected to reach 62 per cent of total population (141 million people) in 2026.”

The PwC also projected that the fiscal conditions in 2026 would remain constrained, reflecting modest revenue gains, persistent debt pressures, and execution risks.

It stated that with elections approaching in 2027, the risk of elevated fiscal spending in 2026 might trigger inflation risks in 2026

It further projected that Nigeria’s Gross Domestic Product (GDP) would grow by 4.30 per cent in 2026, driven by expansion in the services sector and improvement in macroeconomic conditions; adding that “by 2026, Nigeria’s digital prosperity hinges on clear digital-asset regulation, responsible AI adoption, and closing the digital divide.”

It said: “Nigeria’s GDP is projected to expand to 4.3 per cent in 2026 supported by higher crude oil production and stronger performance in dominant sectors.

“Fiscal sustainability risks are expected to persist, driven by low revenue to GDP, fiscal leakages, higher spending, and elevated debt service obligations.

“Headline inflation is projected to moderately ease in 2026, supported by the Central Bank of Nigeria’s (CBN) tight monetary policy stance, rebasing effects, and improved stability in the foreign exchange market.

“The Naira is expected to remain broadly stable through 2026, underpinned by ongoing CBN reforms and improved portfolio inflows.

“With inflation trending down, the CBN may cautiously ease its monetary policy stance in 2026.”

It noted that the projected GDP growth in 2026 would be driven by, “expanding services (especially ICT, finance and real-estate), a gradual recovery in oil and non-oil exports, and modest improvements in macro stability and investor confidence.”

In addition, the professional services company noted that the growth projection for 2026 remained resilient but constrained by sectoral concentration and execution risks.

“Economic growth in 2026 is expected to remain anchored in services, particularly ICT, finance and insurance, and real estate, reflecting sustained digital adoption, financial deepening, and urban demand.

“This services momentum should support headline GDP growth but may continue to concentrate output in capital and technology-intensive sectors.

“Limited spillovers into employment-intensive activities could weaken the transmission of growth to jobs and household incomes,” it said.

The PwC also stated that “tax reforms, execution discipline, and institutional measures will define the 2026 fiscal outlook.”

It also projected that in 2026, “tax revenue mobilisation is expected to strengthen further, driven by the phased implementation of tax reforms, tighter compliance enforcement, expanded use of digital revenue systems, and improved remittance discipline across revenue-generating agencies.”

It added that “the full implementation of the Nigeria Tax Act 2025 is expected to transform the revenue landscape in 2026 by consolidating different taxes into a unified, digital-first system.

“A key pillar of this reform is the mandatory use of the Tax Identification Number (TIN) for all bank account operations and corporate transactions to widen the tax net and reduce evasion.

“The transition from the FIRS to the Nigeria Revenue Service (NRS), will centralise collection, targeting a long-term tax-to-GDP ratio of 18 per cent by 2027 through enhanced compliance rather than rate hikes.

“Despite these efforts, achieving the 2026 revenue target remain challenging, as the government must recover from significant revenue shortfalls recorded during the 2025 fiscal year.”

The PwC highlighted that “partial subsidy reform, particularly in the power sector, may continue to weigh on fiscal outcomes in 2026.”

Commenting on the proposed 2026 budget, the PwC stated that the budget’s fiscal deficit of N23.85 trillion was significantly wider relative to 2025 and underscored continued pressure on public finances.

It said: “Debt service is budgeted at N15.52 trillion in 2026, equivalent to nearly half of projected federal revenue, materially constraining fiscal space for growth-enhancing and social expenditures.”

It noted that sustained reliance on borrowing to finance recurrent obligations and legacy commitments would heighten macroeconomic risks, “including upward pressure on interest rates and reduced fiscal flexibility over the medium term.”

It also stated that the overlapping budget cycle would be a major structural challenge that could weaken execution of capital projects, reflecting persistent spillovers of unfinished projects across fiscal years and gaps in implementation discipline.

“The continuation of overlapping budget cycles, where multiple fiscal years run concurrently, complicates accountability, slows project delivery, and weakens expenditure effectiveness,” PwC said, adding that “capital implementation continues to be constrained by late capital releases, weak contract cash-backing, delays in budget approvals, and reporting lags, which collectively stall projects, increase costs, and erode contractor confidence.”

The PwC also projected that insecurity could worsen in 2026.

It said that “rising kidnappings, insurgency and political violence pushed fatalities higher in 2025 and may worsen Nigeria’s security outlook in 2026.

“Agriculture, manufacturing, and trade are likely to remain constrained by insecurity, high energy and logistics costs, port inefficiencies, and import dependence.

“These structural challenges are expected to continue suppressing productivity and raising operating costs across the real economy.

“As a result, recovery in employment-intensive sectors may remain slow in 2026 despite ongoing reforms and investment commitments.”

The report stated that personnel costs, including pensions, are estimated at N10.75 trillion, accounting for 70.5 per cent of recurrent (non-debt) spending, which limits short-term fiscal flexibility when revenues underperform.

It also said that, “credit conditions may remain tight in 2026, as both supply and demand-sides constraints may limit private-sector borrowing.

“There are key debt sustainability issues to contend with in 2026 to be driven by revenue shortfalls and fiscal imbalance, debt-service burden risk and exchange rate/FX exposure.

“Debt service equals 45.2 per cent of projected revenue, materially crowding out capital and social spending.

“Debt service represents 26.7 per cent of total expenditure.

“A growing share of revenue is absorbed by interest and principal payments, crowding out capital and social spending.

“Fiscal flexibility diminishes, increasing vulnerability to revenue or macroeconomic shocks.

“Fiscal conditions in 2026 may remain constrained, reflecting modest revenue gains, persistent debt pressures, and execution risks

“With elections approaching in 2027, risk of elevated fiscal spending in 2026 may trigger inflation risks in 2026

“Foreign reserves projected to rise in 2026, underpinned by sustained investor confidence and improved external flows.”

It stated that “poverty level is projected to reach 62 per cent of total population (141 million people) in 2026, reflecting the combined effects of legacy policy gaps, global shocks and the short-term costs of ongoing reforms.”

According to the publication, “unemployment is projected to reach 5.3 per cent in 2026, but with over 70 per cent (92 per cnt in 2023) of workers in informal jobs, most new jobs will remain low-pay and low-productivity, limiting real income gains. However, ongoing reforms and private-sector–led activity are expected to gradually improve job absorption and earnings quality over the medium term.”