The naira could face renewed pressure this year as the gap between the official and parallel market exchange rates widens, potentially ending the rare stability the currency recorded last year, according to Bismarck Rewane, Managing Director of Financial Derivatives Company.
Speaking at the Economic Outlook forum organised by the Nigerian-British Chamber of Commerce (NBCC), Rewane noted that the spread between the official and market rates has widened to ₦71, signalling fresh strain in the foreign exchange market.
“The gap between the official rate and market rate has begun to widen at ₦71, suggesting renewed pressure in the FX market,” Rewane said. “The naira is expected to weaken to roughly ₦1,640 per dollar by the end of 2026.”
The naira recorded its strongest performance in more than a decade last year, appreciating by 7.5 percent, following a sharp 41 percent depreciation in 2024. The recovery was supported by policy reforms introduced by the Central Bank of Nigeria, including the Electronic Foreign Exchange Matching System, which restored transparency to the FX market.
However, the currency weakened by 0.3 percent week-on-week to ₦1,423.14 per dollar this week, as demand pressures outweighed supply. Despite this, analysts surveyed by BusinessDay expect the naira to remain broadly stable in the near term, supported by a favourable external position marked by a sustained current account surplus and robust foreign exchange reserves.
Public debt outlook
Rewane also warned that Nigeria’s debt-to-GDP ratio is expected to rise to 40.6 percent in 2026, though he stressed that the increase would be gradual rather than destabilising.
“The slope of this increase will be gentle rather than explosive. Debt will be rising, but not on a clearly unsustainable trajectory in GDP-ratio terms,” he said.
He projected that public debt would edge up steadily to about 43.5 percent of GDP by 2030, entering 2026 already at an elevated level.
Tax reform risks
Rewane identified public misunderstanding of Nigeria’s newly introduced tax reforms as the biggest political risk facing the administration of President Bola Tinubu.
“The biggest political risk this administration faces today is the misunderstanding of these tax laws because people believe that they are being violated,” he said.
He described the new tax laws as complex and confusing, warning that public misperception could undermine reform efforts. Nigeria began implementing four harmonised tax laws in January as part of a broader strategy to simplify tax administration, eliminate leakages, broaden the tax base, and raise tax revenue as a share of GDP from about 10 percent to 18 percent within two years.
Government officials have countered concerns of increased taxation, stating that most workers will pay less tax. Notably, individuals earning ₦800,000 or less annually are exempt from personal income tax under the new regime.
For entrepreneurs and small businesses, the reforms eliminate company income tax for firms with annual turnover of ₦50 million or less, exempt eligible businesses from the 4 percent Development Levy, and remove requirements for VAT registration, collection, and remittance.
Investment outlook
Commenting on the broader economic landscape, Prince Abimbola Olashore, President and Chairman of Council of the NBCC, said Nigeria is at a pivotal moment, facing challenges alongside significant investment opportunities.
“Given the way the global world is going, the best place to be nowadays must be Nigeria. This is where the action is,” Olashore said.
