Lagos
Nigeria’s inflation rate is expected to average 16 per cent in 2026, according to Bismarck Rewane, Chief Executive Officer of Financial Derivatives Company Limited, who says recent declines in inflation figures should be treated with caution, as they largely reflect a change in methodology rather than a sudden improvement in the economy.
Rewane projected the 2026 Economic Outlook presentation organised by the Association of Corporate Treasurers of Nigeria (ACTN) over the weekend, where he delivered a wide-ranging analysis of inflation, exchange rate trends, trade performance, and the risks facing businesses in the coming years.
Rewane explained that the recent sharp fall in headline inflation was caused mainly by the rebasing of Nigeria’s Consumer Price Index (CPI), which changed the base year used for calculating inflation.
“The drop we are seeing is largely a base-year effect,” he said, noting that while the new CPI provides a more current picture of consumption patterns, it does not mean prices are suddenly falling for ordinary Nigerians.
According to him, the recalibration of the CPI has created a statistical reset that makes inflation appear lower, even though food prices, energy costs, and transport expenses remain high across the country.
“Inflation is moderating on paper, but the pressure on households is still very real,” Rewane said, adding that it would take time for reforms to translate into tangible relief.
Rewane also painted a stark picture of the naira’s long-term performance, noting that Nigeria’s currency has lost much of its value over the last decade.
“In 2015, the naira was about ₦190 to the dollar. Today, it is trading around ₦1,430,” he said.
The decline, he explained, reflects structural weaknesses in Nigeria’s economy, including weak export diversification, heavy import dependence, rising debt obligations, and limited foreign exchange inflows.
While recent reforms in the foreign exchange market have improved transparency and reduced multiple exchange rates, Rewane said the naira remains vulnerable because supply is still tight.
Despite the currency challenges, Rewane noted that Nigeria’s exports have improved modestly over the past five years, supported by small productivity gains and higher non-oil export volumes.
He said Nigeria’s trade balance — currently estimated at around six per cent of GDP — improved in 2024 and 2025 and is expected to strengthen further in 2026 if oil production stabilises and non-oil exports continue to grow.
However, he warned that the gains are being offset by debt servicing pressures, which continue to drain foreign exchange and limit the Central Bank’s ability to defend the naira.
“Nigeria is earning more, but we are also paying more,” he said, describing debt repayments as one of the biggest structural constraints on currency stability.
According to Rewane’s analysis, the naira is undervalued by about 11.5 per cent in the official market. While this makes Nigerian exports more competitive, it also increases the cost of imports — especially fuel, food, and industrial inputs — feeding into inflation.
He said that although the exchange rate has shown relative stability in recent months, it is not yet fully anchored and remains sensitive to shocks.
Financial Derivatives projects the naira could weaken further to about ₦1,579 to the dollar in 2026, and ₦1,811 by 2028, depending on global oil prices, capital flows, and the pace of domestic reforms.
Rewane used the platform to warn corporate treasurers and finance executives against excessive cash hoarding, saying the strategy is no longer effective in an environment of high inflation and volatile exchange rates.
He urged businesses to adopt more strategic liquidity management, including:
- Better timing of foreign exchange conversions
- Increased use of hedging instruments
- Aligning treasury decisions with long-term business planning
- Reducing exposure to currency mismatches
“Stability should not be mistaken for safety,” he said, stressing that companies must actively manage risk rather than wait for conditions to improve.
For households, Rewane’s outlook suggests that prices will continue to rise, albeit at a slower pace than in previous years, while the naira’s weakness will keep imported goods expensive.
For businesses, the message is clear: the economic environment is improving in structure but remains fragile in reality.
And for policymakers, the projection of 16 per cent average inflation in 2026 underscores the urgency of sustaining reforms, boosting exports, cutting wasteful spending, and easing the cost-of-living burden on ordinary Nigerians.
As Nigeria enters another year of economic transition, Rewane’s outlook serves as a reminder that statistical progress must still be matched by real economic relief — for families, businesses, and the broader economy alike.