In its 2026 outlook, the Central Bank of Nigeria (CBN) has warned that projected next year’s public debts may worsen private sector liquidity and raise interest rates.
The report, released yesterday, noted that the N12.14 trillion expected to be raised from the domestic market is likely to hurt credit to the real sector.
It said: “Overall fiscal deficit for 2026 is projected at N12.14 trillion, representing 3.01 per cent of GDP. The deficit is expected to be financed by new borrowings from domestic sources (N7.02 trillion), external (N1.76 trillion), asset sales and privatisation proceeds (N0.4 trillion) and multilateral/bilateral project-tied loans (N2.96 trillion).
“The financing mix indicates a preference for local debt markets, which may tighten private sector liquidity, raise domestic interest rates and minimise exposure to foreign exchange risk.”
The recent debt dynamics and outlook indicated that the public debt is anticipated to remain on a sustainable path in 2026. It is projected at 34.68 per cent of GDP by end-2026 compared with 33.98 per cent at end-June 2025.
The development is predicated on expected new borrowings, as discretionary fiscal policy actions remain a major driver of debt dynamics. The report noted that the revaluation effect on public debt, which dominated debt dynamics in 2023-2025, is expected to narrow in 2026 owing to exchange rate stability.
According to the report, the impact of exchange rate changes on public debt, which was the main driver of debt growth from 2023 to 2025, is expected to taper in 2026, adding: “With these valuation losses easing, debt growth will rely less on one-off adjustments and more on traditional factors like the primary balance, supported by the Tax Act of 2025 and real economic growth.”
The report sees the external balance remaining positive in 2026, spurred by robust export growth and steady remittances inflow.It attributed the projection to the rise in export earnings based on the anticipated increase in crude oil and gas output, even as infrastructure and security at oil installations continue to improve.
Overall, the report said the external position would be driven by a potential rise in demand by economies of major trading partners and reinforced by an expected increase in foreign investments.
It projected the current account balance to attain a higher surplus of $18.81 billion (11.16 per cent of GDP).In the goods account, export receipts are projected to increase to $58.26 billion, from $54.59 billion in 2025, driven by higher oil and non-oil exports.
The report noted that the commencement of petroleum product export in 2025 is expected to boost export earnings.
“For non-oil, the sustained increase in agricultural commodity and fertiliser exports is anticipated to boost receipts. The recently-launched National Export Trading Company (to address persistent gaps in the export value chain) and National Intellectual Property Policy (to boost creative exports) are expected to further buoy non-oil receipts. Import is projected to rise to $43.27 billion from $39.92 billion in 2025, driven by the anticipated increases in demand for capital goods and intermediate inputs,” it stated.
The service account deficit is expected to widen to $13.68 billion in 2026 from $12.8 billion in 2025, hinged on anticipated increases in payments for business and transport services.
The expected rise in business services follows Nigeria’s increasing appetite for research and development services.
It added that payment for transport services could be influenced by the anticipated increase in freight charges in line with higher imports of non-oil merchandise.
The primary income account is projected to remain in deficit, at $8.62 billion, due to higher investment income payments to non-resident investors, as relatively attractive yields spur foreign portfolio inflows.
