By Seun Ibiyemi
The Central Bank of Nigeria (CBN) has issued a dual-toned macroeconomic outlook for 2026, celebrating a robust recovery in foreign reserves while sounding a sharp alarm over deteriorating asset quality in the banking sector.
In a pivotal shift for the industry, Nigeria’s non-performing loans (NPLs) have surged to an estimated 7.00%, officially breaching the 5.00% regulatory threshold.
This spike follows the withdrawal of COVID-19-era regulatory forbearance measures, which previously allowed lenders to shield their balance sheets from the full impact of credit defaults. The CBN warned that this worsening NPL profile represents a direct threat to bank profitability and credit availability, potentially triggering systemic contagion across the financial system if left unchecked.
The apex bank’s report highlights that while the sector remains fundamentally sound, the post-forbearance environment is testing lenders’ risk-bearing capacity. The CBN cautioned that increased credit losses, coupled with any unforeseen foreign exchange illiquidity, could erode capital buffers and disrupt financial intermediation.
Despite these headwinds, the sector maintains significant defensive moats. The liquidity ratio currently stands at a robust 65.00% well above the 30.00% regulatory minimum—while the capital adequacy ratio of 11.60% exceeds the 10.00% benchmark. To fortify this resilience, the CBN is prioritizing its recapitalization exercise, aimed at building a trillion-dollar economy by raising minimum capital requirements to ensure banks can absorb unexpected shocks.
Contrasting the credit risks is an exceptionally bright outlook for Nigeria’s external position. The CBN projects that foreign exchange reserves will maintain a strong growth trajectory, reaching $51.04 billion in 2026. This build-up is expected to provide the necessary firepower to defend the naira and boost investor confidence across key sectors.
The bank estimates reserves will close 2025 at $45.01 billion, marking a $6.03 billion increase over the next 12 months. This liquidity cushion is projected to sustain exchange rate stability and bolster corporate balance sheets by reducing foreign exchange losses for import-dependent companies.
Driven by these reforms and a gradually easing monetary policy stance, the CBN expects the economy to expand by 4.49% in 2026, up from the 3.89% estimated for 2025. This growth is anchored on structural reforms, improved oil sector production, and enhanced domestic refining capacity.
On the pricing front, the apex bank is moving toward a formal inflation-targeting framework. The goal is to cool consumer price pressures to 13% by 2027, down from a projected 18.5% in 2025.
The CBN anticipates that increased competition in the midstream oil sector will drive down petrol (PMS) prices, while a faster decline in food prices—supported by improved security and policy coordination will help anchor long-term price stability.
As of November 2025, inflation had already slowed to 14.45%, marking its eighth consecutive monthly decline. While the regulator warns of investor fatigue and cyber-risks as potential spoilers, the 2026 outlook suggests an economy finally finding its footing after years of volatility.