Nigeria is heading into 2026 with the federal budget still in “patch-up” phase, following repeated extensions of the 2024 capital expenditure (CAPEX) implementation to December 2025. As a result, execution of the 2025 CAPEX has lagged significantly, with only about 24.8 per cent of the N23.4 trillion allocation expected to be implemented by year-end, leaving a sizable rollover into an uncertain 2026 fiscal framework.
This misalignment reflects persistent revenue underperformance, fuelled partly by overly ambitious assumptions, and on the other hand, escalating expenditure pressures.
Notably, while the Federal Government celebrated gross non-oil revenue collection overperformance in third quarter 2025 (N24.2 trillion versus N20.0 trillion budgeted), oil revenue component – projected to account for 50.3 per cent of the N40.9tn total revenue target – likely underperformed by at least 24.0 per cent, given average output of 1.66mbpd and an oil price of $70.92/bbl. as against 2.06mbpd and $75.00/bbl. budgeted.
A notable insight from the 2026 budget presentation speech of President Bola Ahmed Tinubu to the National Assembly on December 19, 2025, was that actual revenue as of the end of Q3:2025, N18.2 trillion, trailed budgeted pro-rata by 40.7 per cent. The immediate consequence of this development is the overshooting of the estimated fiscal deficit for the year by 5.7 per cent to N14.8 trillion at the end of Q3.
Looking ahead, effective fiscal management will be critical to sustaining the economic recovery, particularly amid pre-election dynamics and a resurgence in security challenges. Nonetheless, we project growth to strengthen to 4.3per cent in 2026, supported by improved inflation anchoring, FX stability, and sustained private-sector investment, particularly in the oil & gas, telecommunications, and agriculture sectors.
The fixed income landscape is expected to remain selective. Inflation moderation, stabilising policy expectations, and disciplined issuance provide support for returns; however, heavy domestic funding needs and active liquidity management by the CBN are likely to keep system liquidity structurally constrained.
Market performance is therefore expected to favour carry efficiency, roll-down strategies, and medium-tenor positioning, with gradual scope for duration re-engagement contingent on the pace of policy easing and the balance between yield compression and inflation dynamics.
Our outlook for 2026 is constructive, anchored by favourable macroeconomic and market dynamics.
In our base case scenario, we project a 40.9 per cent gain in the NGX-ASI, supported by sustained price and naira stability, gradual monetary policy easing, improved corporate earnings, elevated pre-election liquidity, and aggressive capital mobilisation by insurance companies and PFAs, with additional upside from anticipated listings such as Dangote Petrochemicals. Upside risks include sharper disinflation and stronger FX inflows, while downside risks stem from renewed inflationary pressures, forex volatility, weak foreign participation, and delays in expected listings.