Nigeria’s economic future is being mapped out in bold projections, with optimistic forecasts laid out by renowned economist Bismarck Rewane. Speaking at the Access Bank Customer Forum in Lagos, Rewane, the Managing Director and CEO of Financial Derivatives Company Limited, painted a picture of a growing economy, steadying at a projected 3.5% growth by 2026.

That growth, he said, would push Nigeria’s gross domestic product (GDP) to an impressive $400 billion, potentially making the country the second-largest economy in sub-Saharan Africa.

“The Nigerian economy will grow at 3.5 per cent (approximately $400bn). Nigeria is on track to becoming the second-largest economy in sub-Saharan Africa,” Rewane declared, setting the tone for what he sees as a bright, albeit challenging, future for the country.

As part of this economic optimism, Rewane also foresaw improvements in Nigeria’s foreign exchange (forex) auction system. He projected that foreign reserves, a critical factor in the country’s economic stability, would grow to $20 billion, further strengthening the nation’s financial standing.

“There will be an efficient forex auction system, and unencumbered foreign reserves will hit $20bn,” Rewane predicted, reflecting his belief in a leaner, more functional system.

However, not all is set on an easy course. While there are gains to be expected, the naira’s performance is less than ideal. According to Rewane, by 2026, the naira is expected to trade at N1,550 to the dollar in the parallel market. This, he explained, will be driven by a combination of intervention funds, diaspora remittances, and exchange rate policies.

“These gains are driven by intervention funds, remittances, and adjustments to exchange rate policies,” Rewane noted, though he acknowledged that the exchange rate was a cause for concern.

Inflation and Interest Rate Forecasts

On the topic of inflation, which has plagued the Nigerian economy in recent years, Rewane offered some relief. He predicted that inflation would drop to 22% by 2026, a notable improvement from its current levels. In tandem with this decline, he expects the monetary policy rate (MPR) to come down to 20% annually, which, in his view, would reduce the prevalence of bad loans in the banking sector.

“We will see inflation drop to 22 per cent, and the MPR is likely to come down to 20 per cent, which will reduce bad loans,” Rewane explained, pointing to the potential for a healthier financial sector with reduced risk.

Petrol Prices and Stock Market Growth

Fuel prices, always a recurring controversial issue in Nigeria, are expected to stabilize at N900 per liter by 2026, according to Rewane. This, he said, would be due to increased production from the Dangote refinery and smaller modular refineries, ensuring a steadier supply of fuel.

“We expect petrol to stabilize at N900 per liter due to increased production from Dangote refinery and modular refineries,” Rewane said, giving Nigerians some hope for fuel price stability.

He also had positive news for the stock market. He projected that market capitalization would reach N58 trillion by 2026, supported by the listing of major companies such as Dangote Refinery and the Nigerian National Petroleum Corporation (NNPC). These developments, he argued, would inject fresh energy into the market and attract more investors.

Commodity Prices on the Rise

Despite the encouraging forecasts for economic growth and inflation, the cost of essential commodities is expected to rise significantly. Rewane predicted that by 2026, a basket of tomatoes would cost N20,000, a bag of rice would sell for N75,000, and a bag of beans would reach N110,000. These price hikes reflect the ongoing pressures on food supply and demand in the country.

Minister of Finance’s Optimism

While Rewane’s forecasts provide a broad outlook, the Minister of Finance, Wale Edun, also weighed in with some encouraging data. According to Edun, Nigeria has experienced a net inflow of approximately $2.35 billion per month into the Central Bank’s reserves over the first seven months of the year, which has helped stabilize the naira in the forex market.

“There has been a net inflow in the first seven months of this year of about $2.35bn every month,” Edun explained. This, he said, had also contributed to improved foreign exchange liquidity.

“We also have foreign exchange liquidity. The gross reserves are up,” he added.

The finance minister credited the government’s efforts for these positive developments.

“On the fiscal side as well, government revenues are growing,” Edun said, highlighting the strides made in improving the country’s fiscal position.

However, he noted that Nigeria’s tax-to-GDP ratio, currently at 10%, and revenue-to-GDP ratio at 15%, were still low, calling for increased spending on infrastructure and social safety nets.

Diverging Views from Taiwo Oyedele

While Rewane’s projections were largely optimistic, Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, voiced a more cautious outlook. He expressed concerns over Nigeria’s current economic challenges, including divestment, poor education, and rising unemployment.

“Our projection is slow, and I do not pray that Bismarck’s projection comes to pass,” Oyedele said, highlighting the issues that continue to impede Nigeria’s economic progress. He also pointed out that the naira had lost ten times more value than the Kenyan shilling, emphasizing the magnitude of Nigeria’s currency depreciation in recent years.

Oyedele stressed the need for more data-driven decision-making to ensure that Nigeria’s policies and reforms are effective.

“We need to use data and evidence so that it can work for us,” he said, advocating for a more informed approach to policy-making.

In closing, Oyedele shared the government’s plans to reduce corporate income tax in the coming years, aiming to ease the tax burden on businesses while improving the efficiency of tax collection to increase revenues.

Bismarck Rewane’s projections, supported by key government insights, suggest a mixed outlook for Nigeria’s economy. While there are clear signs of potential growth, especially in GDP, forex reserves, and the stock market, the challenges of inflation, rising commodity prices, and currency depreciation cannot be overlooked.