Reforms Meet Politics in a High-stakes Economic Year

Nigeria reached 2026 at a delicate crossroads, balancing hard-won economic stabilisation against the rising pull of pre-election politics. Inflation has eased, the naira has steadied, and reforms are moving from design to execution, yet campaign spending and fiscal pressures are already gathering force. This is a year when budgets, markets, and institutions will be tested simultaneously. How policy discipline holds under political strain will shape business assurance and economic outcomes well beyond 2026, writes Festus Akanbi

Nigeria entered 2026 with two powerful currents. One is the momentum of economic reforms that, after years of distortion, have begun to restore a measure of stability to prices, the exchange rate, and investor confidence. The other is the unmistakable pull of politics, as preparations for the 2027 general elections start early and inject money, tension, and urgency into every corner of the economy. The interaction between these two forces will shape business conditions sector by sector, producing a year that is unlikely to be calm, but also far from directionless.

At the macro level, the economy is emerging from a bruising adjustment phase. By the end of 2025, inflation had slowed markedly from its early-year highs, the naira had settled into a more predictable trading range, and business confidence had begun to recover. Independent forecasts from institutions such as the Centre for the Promotion of Private Enterprise suggest that gross domestic product growth could accelerate to around four to four-and-a-half per cent in 2026, driven mainly by services and supported by improved conditions in non-oil sectors. This transition from stabilisation to growth, however, will unfold under tight fiscal conditions and growing political pressure to spend.

Fiscal Policy

Fiscal policy will sit at the heart of this tension. The N58.18 trillion federal budget for 2026 is designed as a corrective measure after years of weak execution and repeated capital project rollovers. The government has framed it as a consolidation budget, signalling an intention to end the cycle in which projects are endlessly reapproved without funding. Yet the constraints are severe. Debt service alone is projected to absorb more than N15 trillion, reflecting a public debt stock of about N152.4 trillion by mid-2025. This burden limits the amount of fiscal stimulus that can realistically be delivered, even as political activity intensifies and demands for visible projects multiply.

The credibility of the 2026 budget will therefore depend less on its size than on its effective implementation. Roads, power projects, and security-related infrastructure are expected to receive priority because they offer both economic payoffs and political visibility. At the same time, the administration has placed unusual emphasis on digitising revenue collection, tightening remittances from government-owned enterprises, and enforcing performance targets across ministries and agencies. If these measures are effective, they could improve cash flow for capital projects and gradually reduce the gap between appropriations and outcomes. This gap has long undermined Nigeria’s fiscal planning.

Implementing New Tax Regime

Overlaying the budget is the most ambitious overhaul of the tax system in decades. On January 1, 2026, the Nigeria Tax Act and the Nigeria Tax Administration Act are scheduled to take effect, reshaping the taxation of income, consumption, and corporate profits. The reforms are explicitly redistributive. The majority of salaried workers are expected to see their personal income tax liabilities eliminated or sharply reduced. At the same time, almost all small businesses will be exempt from corporate income tax, value-added tax, and withholding tax. Large corporations, by contrast, will operate under lower headline rates but face stricter compliance and a broader tax net.

Banking Sector Recapitalisation

The banking sector enters this period in a stronger position than it has been in years. By 2026, the recapitalisation programme initiated by the Central Bank is expected to be fully concluded, leaving banks with thicker capital buffers and greater capacity to absorb shocks. This new regime is designed not only to enhance stability but also to support larger-scale lending to infrastructure, manufacturing, and energy projects. As inflation eases and interest rates potentially begin a gradual decline, credit demand is likely to increase, thereby improving banks’ asset quality and profitability.

At the same time, regulation will become more exacting. Banks will operate under tighter supervision, more rigorous provisioning standards, and closer scrutiny of foreign-currency exposures. Those that successfully raise capital and adapt to the new framework will be better positioned to expand digital services, finance large projects, and compete regionally. Weaker institutions may be pushed toward consolidation or niche strategies. Overall, the sector’s trajectory in 2026 points to cautious expansion rather than exuberance, with growth concentrated in areas aligned with government spending and consumer recovery.

Business Environment

For the business environment, the implications are significant. Reduced tax pressure on households is likely to support consumer demand at a time when real incomes are still recovering from inflation shocks. Small and medium-sized enterprises should benefit from improved cash flow and reduced administrative friction, which could encourage formalisation and expansion. For larger firms, particularly those in consumer goods, telecommunications, banking, and energy, the reforms underscore the importance of transparency, data integrity, and tax planning. Politically, the reforms will be tested in an election-tinged environment, where resistance from affected interests could complicate enforcement. Economically, however, they represent an apparent attempt to rebalance growth away from a narrow tax base and toward broader participation.

Monetary Policy

Monetary conditions in 2026 will be shaped as much by politics as by policy. Election cycles in Nigeria are traditionally associated with heavy cash spending, increased imports, and heightened foreign exchange demand. These dynamics can generate short-term inflationary pressure and strain the currency. Yet the starting point for 2026 is stronger than in previous cycles. The naira has traded within a relatively narrow band since mid-2025, and foreign reserves have been more stable. Analysts broadly expect the currency to hover around the mid-N1,400s to the dollar, assuming oil receipts hold up and portfolio inflows continue.

Energy Sector

Energy will remain one of the most consequential sectors of the year, particularly the downstream oil market. The resolution of long-running disputes over petrol supply and pricing, particularly between the Dangote Refinery and fuel importers, is set to redefine market structure. The planned implementation of a 15 per cent import duty on fuel imports is intended to tilt the balance decisively toward domestic refining. If enforced consistently, this policy will reduce foreign exchange outflows, improve Nigeria’s trade balance, and strengthen the commercial viability of local refineries.

Campaign Funding

The risk lies in the second half of the year, when campaign spending typically accelerates. Large political expenditures on logistics, media, and patronage often leak into the foreign exchange market, either directly or indirectly. Managing this pressure without reversing the gains of monetary stabilisation will be one of the Central Bank’s most complex tasks. Excessive tightening could choke credit and undermine growth, while insufficient tightening could reignite volatility. The balance struck in 2026 will have consequences for investment sentiment well beyond the election cycle.

Power

Electricity is another sector where gradual structural change is reshaping outcomes. The decentralisation of power generation and distribution has afforded state governments greater scope to pursue embedded generation, solar projects, and mini-grids. In 2026, these subnational initiatives are expected to play an increasing role in supporting industrial clusters, agro-processing zones, and digital services. While the national grid will continue to face challenges as it did in previous years, the spread of localised solutions is reducing the effective power deficit for parts of the economy, with positive implications for productivity and investment.

Technology

Technology stands out as a sector relatively insulated from political cycles. The accelerated adoption of artificial intelligence across banking, telecommunications, logistics, and retail is expected to drive efficiency gains and the development of new business models. Digital and social commerce will continue to expand, supported by Nigeria’s youthful population and improvements in payment infrastructure. Firms that invest in automation, data analytics, and AI-driven customer engagement are likely to gain competitive advantages, while laggards face rising costs and declining relevance.

Taken together, these dynamics suggest that 2026 will be a year of managed complexity rather than dramatic reversal. Growth will not be evenly distributed, and risks will remain, particularly from election-related spending, oil price volatility, and security challenges. Yet the combination of fiscal reform, tax restructuring, financial sector strengthening, and targeted infrastructure investment provides a foundation for cautious optimism. For businesses and investors, success in 2026 will depend on understanding how politics and policy intersect, and on positioning within sectors where reform momentum and market demand reinforce each other rather than collide.

Infrastructure

Infrastructure, more broadly, will be a significant area of activity. Road construction, including high-profile coastal projects, is expected to require substantial capital investment. These investments aim to ease logistics bottlenecks, improve port evacuation, and reduce transport costs, all of which weigh heavily on competitiveness. Progress will be uneven, reflecting funding constraints and execution capacity, but the construction and materials sectors are likely to benefit from sustained public works activity through 2026.

Capital Market

Capital markets could experience a defining moment if planned listings by major entities, such as Dangote Group companies and the Nigerian National Petroleum Company Limited, materialise. Together, these listings have the potential to dramatically expand market capitalisation, deepen liquidity, and attract long-term domestic and foreign investors. For pension funds and asset managers, they would offer rare large-scale investment opportunities in sectors that dominate the real economy. The timing and structure of these listings will be closely watched as signals of the government’s commitment to market transparency and reform.

Agriculture

Agriculture remains both a pillar and a vulnerability. It contributes more than 30 per cent of GDP and employs a large share of the workforce, yet its growth has been constrained by insecurity, low productivity, and weak logistics. A sustained crackdown on banditry and rural violence would have immediate economic benefits, improving food supply, moderating inflation, and boosting rural incomes. In 2026, agro-processing, storage, and distribution are likely to outperform primary production unless security conditions improve significantly.

Pricing Tension

In the short term, there may be pricing tensions as the market adjusts to new cost structures. Over the medium term, however, increased domestic refining capacity is likely to reduce the risk of supply disruptions and improve energy security. The success of this transition will depend on regulatory clarity, logistics efficiency, and refiners’ ability to operate at scale without political interference.

The older state-owned refineries in Port Harcourt, Warri, and Kaduna occupy a more uncertain space. Despite ongoing rehabilitation efforts, their output has remained inconsistent. In 2026, they are unlikely to regain a central role in fuel supply. Instead, their economic relevance will hinge on whether governance reforms can turn them into commercially run assets rather than perpetual fiscal drains. Without such reforms, they will remain peripheral in an energy landscape increasingly dominated by private players.