Inflation Moderates to 15.10% as Food Disinflation and FX Stability Ease Price Pressures

 Nigeria’s headline inflation eased marginally to 15.10% in January 2026, down from 15.15% in December 2025, according to the National Bureau of Statistics. The moderation was more pronounced on a month-on-month basis, with prices declining by 2.88%, compared to a 0.54% increase in December. The negative month-on-month reading indicates that average prices declined relative to the previous month. However, the twelve-month average inflation rate stood at 21.97% in January 2026, compared to 17.59% recorded in January 2025, reflecting accumulated price pressures over the past year.

The durability of this disinflation trend remains uncertain. While improved food supply and currency stability have supported near-term relief, structural risks persist, including insecurity in food-producing regions and potential volatility in global commodity markets. Moreover, the divergence between the current headline rate and the elevated twelve-month average suggests that inflationary pressures are moderating but not fully extinguished.
At its February 23–24 meeting, the Monetary Policy Committee reduced the Monetary Policy Rate from 27 percent by 50 basis point to 26.5 percent, signalling a cautious shift in stance in response to easing headline pressures. The adjustment suggests that policymakers view recent inflation data as sufficiently encouraging to begin a gradual recalibration, while still maintaining a tight monetary posture. With core inflation remaining elevated and the revised CPI framework still bedding in, the rate cut appears measured rather than expansionary. Further easing will likely depend on whether disinflation proves sustained across both food and core components in the months ahead.

CBN Reopens FX Window to BDCs as Exchange Rate Spread Narrows

The Central Bank of Nigeria reinstated licensed bureaux de change (BDCs) into the Nigerian Foreign Exchange Market (NFEM) on February 11, permitting each operator to access up to $150,000 weekly through authorised dealer banks at prevailing rates. The decision marked a reversal of years of exclusion from direct official FX access and was aimed at improving dollar liquidity in the retail segment.

Following the directive, the exchange rate spread between the official and parallel markets compressed sharply. The gap narrowed from about ₦80 to roughly ₦29 by February 19, as market participants reacted to the expectation that additional retail supply would enter the system. By February 23, the official NFEM rate stood at ₦1,349.24/$, while the parallel market rate was approximately ₦1,360/$, implying a spread of about ₦10.76, or roughly 0.8 percent. The initial compression largely reflected improved sentiment and anticipated liquidity rather than a full operational shift in supply.

As of February 24, however, the spread widened again to roughly ₦70, with the official rate around ₦1,354/$ and the parallel market near ₦1,425/$. The adjustment reflects the resumption of normal trade activity following the holiday and the fact that the BDC framework, while formally in place, is still in its operational rollout phase. Allocations are being processed under strict compliance conditions — including card-based settlements, KYC verification, reporting requirements, a 25 percent cash cap, and restrictions on open FX positions — which has slowed full distribution across the segment.

Although expanded BDC access broadens the official distribution channel, sustained rate alignment will depend on consistent FX supply and effective transmission into the retail market. Until liquidity conditions strengthen more durably, exchange rate margins are likely to remain sensitive to shifts in demand and implementation pace.

Capital Importation Surges to $16.78bn as Portfolio Flows Dominate Inflow Mix

Nigeria attracted $16.78 billion in capital importation in the first nine months of 2025, surpassing the $12.32 billion recorded for the full year 2024, according to data from the National Bureau of Statistics (NBS). Portfolio investment accounted for $14.25 billion, or 85% of total inflows, driven by strong foreign appetite for high-yield money market and fixed-income instruments. Money market instruments alone attracted $10.75 billion, while bonds drew $2.92 billion and equities $591 million. In Q3 alone, inflows reached $6.01 billion, with the banking sector receiving $3.14 billion, underscoring the concentration of foreign capital within financial assets.

Recent data indicate that this portfolio-driven pattern has continued into 2026. According to FMDQ, total FX inflows reached $3.0 billion in January, up 7% month-on-month, with portfolio inflows rising 151% to $1.6 billion, 98% of which was directed to fixed-income securities. External reserves climbed to $48.5 billion by mid-February, the highest level since 2013. While the reserve build-up strengthens near-term external buffers, the continued dominance of portfolio capital means FX stability remains sensitive to shifts in global risk appetite. Broadening the inflow base toward sustained, long-term investment will be central to strengthening export capacity and reducing vulnerability to capital flow reversals.

Nigeria’s Crude Oil Output Rises to 1.459m bpd but Remains Below Budget Assumptions

Nigeria’s crude oil production rose to 1.459 million barrels per day (bpd) in January 2026, up from 1.422 million bpd in December 2025, according to OPEC’s Monthly Oil Market Report (direct communication data). The increase of 37,000 bpd represents a modest month-on-month improvement and reinforces Nigeria’s position as Africa’s largest oil producer. However, output remains below the country’s OPEC quota of 1.5 million bpd, marking the sixth consecutive month of underperformance. The January shortfall of roughly 41,000 bpd highlights persistent operational and security constraints despite gradual recovery.

In global oil markets, Brent crude was trading around $71 per barrel as of February 23, amid renewed geopolitical tensions surrounding U.S.–Iran nuclear negotiations and broader supply uncertainty. The price remains above Nigeria’s budget reference of $64.85 per barrel, offering some near-term support to revenue assumptions. However, oil price movements remain volatile, and Nigeria’s fiscal position is more sensitive to sustained production volumes than to marginal price gains. Without a sustained increase in output, current price levels alone are unlikely to offset the revenue implications of continued volume underperformance in 2026.

Nigeria Revenue Service Sets ₦40.71 Trillion Target for 2026

The Nigeria Revenue Service (NRS) has set a ₦40.71 trillion revenue target for 2026, a 44 percent increase over the ₦28.3 trillion collected in 2025. Historical trends show a remarkable trajectory: total revenue grew from ₦6.4 trillion in 2021 to ₦28.3 trillion in 2025, with non-oil revenue rising from ₦4.4 trillion to ₦21.5 trillion, while oil revenue increased from ₦2.01 trillion to ₦6.8 trillion over the same period. This growth reflects both structural improvements in tax administration and targeted enforcement.

Recent tax reforms reinforce the structural logic of revenue expansion. The revised 2026 framework is progressive, shielding low-income earners while broadening the base through higher thresholds for small businesses, thereby aligning compliance with economic capacity rather than extracting excess. If fully implemented, these measures could underpin the target while moderating liquidity impacts on private actors.

Ultimately, meeting ₦40.71 trillion will depend on administrative efficiency, enforcement reach, and credible fiscal signalling—making scenario-based monitoring and proactive stakeholder engagement essential for evaluating feasibility and risks.

FG Extends 30% of 2025 Capital Budget to November 2026

The Federal Government has announced that implementation of the outstanding 30 percent of the 2025 Capital Budget will commence before the end of February 2026 and run until November 30, 2026. The remaining 70 percent of the 2025 capital allocation has been rolled forward into the 2026 fiscal framework, pushing unresolved 2025 capital obligations into 2026. Warrants have been issued to Ministries, Departments and Agencies (MDAs), and the restored GIFMIS platform is expected to support execution and monitoring.
This decision represents a shift from the earlier fiscal “Hard Reset” plan, which had envisaged ending overlapping budget cycles by March 2026 and restoring a unified budget framework from April. Instead, capital commitments from 2025 will now extend deep into 2026, indicating that consolidation of outstanding obligations is taking longer than initially projected.

The extension reflects the scale of the 2025 execution shortfall. Capital releases to MDAs were reported at less than ₦1 trillion in the first seven months of the year, against a pro-rata benchmark exceeding ₦10 trillion. This implies severe under-execution relative to appropriated levels, largely driven by revenue shortfalls and liquidity constraints. With a significant share of federal revenue absorbed by debt service, capital disbursement has lagged materially behind budgeted commitments. The rollover therefore preserves ongoing projects under constrained fiscal conditions rather than signalling a completed structural reset.
While the revised timeline provides continuity for delayed projects, it also raises practical questions about sequencing. With a significant portion of 2025 capital obligations now extending into November 2026, the operational start and execution clarity of the 2026 capital framework becomes critical. Overlapping commitments risk stretching administrative capacity and cash management systems unless revenue inflows and disbursement discipline improve materially.

Restoring coherence to the budget cycle will depend on improved revenue realization, stronger cash flow management, and a sustained increase in actual capital releases. Without clearer synchronization between appropriations, cash availability, and project execution timelines, the intended fiscal consolidation may remain incomplete.