…Forecasts About 4.2% GDP Growth In 2026
The Nigerian Economic Summit Group (NESG), one of the economic think-tank groups in the country, has cautioned that fiscal excesses associated with the 2027 elections could undermine the gains recorded by the Federal Government through its ongoing reforms, crowd out private sector credit, and erode investor confidence in the nation’s economy.
The group, in its 2026 Half-Year Outlook Report launched at its Industrialisation and Competitiveness Forum held on Wednesday in Abuja, warned that election-related uncertainty remained a key downside risk to Nigeria’s growth outlook.
According to the NESG, as political activities intensify ahead of the 2027 general elections, reform momentum could weaken while fiscal discipline comes under pressure from increased pre-election spending.
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Noting that Nigeria’s economy based on latest data shows signs of sustained recovery as Gross Domestic Product (GDP) grew by 3.9% in Q1 2026, up from 3.1% in Q1 2025 driven largely by non-oil sectors, and the Purchasing Managers’ Index (PMI) rose to 53.3 points in the second quarter from 52.8 points in Q1, indicating faster business expansion, the think-tank cautioned that these gains remained fragile and could be reversed if policymakers prioritise short-term political considerations over long-term structural reforms.
The report linked heightened pre-election spending typically to higher recurrent expenditure, including subsidies, transfers, public sector wages, and constituency projects, often at the expense of capital investment, adding that such fiscal recklessness will not only widen the budget deficit, forcing the government to increase domestic borrowing, but also will raise interest rates and crowd out private sector access to credit, undermining the very business activity that has driven the non-oil recovery.
Similarly, the NESG reported that higher debt-service costs would also limit fiscal space for critical capital expenditure and social spending, weakening the “inclusion” pillar of the government’s industrialisation agenda.
It also identified the risk of “reform fatigue”, a scenario where politicians and technocrats slow or reverse painful but necessary measures, such as fuel pricing, power tariffs, and tax reforms, to avoid short-term political backlash.
It projected that mixed signals on foreign exchange policy, monetary tightening, and public sector restructuring could emerge as different arms of government chase competing political narratives, creating policy inconsistency that deters investment.
The NESG further clarified: “Delayed structural reforms reduce investor confidence and increase the risk premium on Nigerian assets. For investors, the fear is not just one bad budget, but a pattern of stop-go reforms that erode credibility built since 2024.”
The group also predicted that election-driven fiscal expansion could also reignite inflationary pressures through higher aggregate demand in an economy that is still contending with insecurity and climate shocks, adding that if the Central Bank of Nigeria (CBN) faced pressure to accommodate government borrowing, monetisation of deficits could further fuel price growth.
The think-tank maintained that even if inflation averages 15.5 per cent in 2026 as projected, the risk remained of a serious surge in 2027 if pre-election spending coincided with supply disruptions from insecurity or climate events, while renewed FX pressures could also emerge if imports surge on the back of government and campaign spendings while confidence wavers.
The NESG’s report indicated that the stabilisation gains, improved PMI, business activity in expansion territory, and rising external reserves would be based on policy consistency, pointing out that if markets perceive a shift towards short-term political spending over structural reforms, portfolio inflows could reverse quickly, especially if global conditions tighten. Foreign direct investment plans in manufacturing and infrastructure may also be delayed or scaled back.
It stated that this remained how election-related uncertainty can undermine macroeconomic stability, delay structural reforms, and reduce investor confidence, and by so doing threaten the consolidation phase of the government’s economic reforms after years of stabilisation drive.
The NESG projected GDP growth of about 4.2 per cent in 2026 for the country, with external reserves expected to rise to approximately $53 billion by the end of this year, adding however, that these projections assume continued policy discipline, an assumption that could be tested as the 2027 election cycle heats up.
The economic think-tank maintained that for Nigeria to sustain its industrial transformation agenda, policymakers may need to resist the temptation of pre-election populism and maintain focus on structural reforms that improve productivity, lower business costs, and crowd in private investment.
It stressed: “The consolidation phase demands the same courage, consistency, and commitment that characterised the stabilisation efforts. Nigeria cannot afford to pause or retreat.”
