Nigeria’s Central Bank is formally entrenching its transition to an inflation-targeting monetary framework, with the long-term objective of moderating inflation to 13 per cent by the year 2027.

These details were outlined in the Central Bank of Nigeria’s 2026 macroeconomic outlook released on Tuesday. The bank also projects that inflation will average around 21 per cent in 2025.

According to a phased implementation plan, the apex bank intends to target an inflation rate of 16.5 per cent in 2026, with a tolerance band of plus or minus two percentage points. This represents a reduction from the 18.5 per cent target set for 2025.

The move towards an inflation-targeting framework aligns Nigeria with regional peers such as Ghana and South Africa, both of which adopted similar transitions to stabilise prices and ultimately achieve single-digit inflation rates.

This policy shift forms part of a broader series of economic reforms initiated since President Bola Tinubu assumed office in 2023. Under his administration, currency controls have been removed, fuel subsidies scrapped, and plans finalised for the introduction of a new tax regime scheduled to take effect from January 1.

“The initial phase features transitional inflation targets designed to enhance policy credibility,” the Central Bank said in the report. It added that the framework would function as a transparent medium-term anchor while institutional capacity is being strengthened.

The Central Bank also projected an improvement in the exchange rate, forecasting that the naira would average N1,400 to the dollar in 2026, compared to approximately N1,451 currently. This outlook is underpinned by expectations of a more efficient foreign exchange market, increased capital inflows and the maintenance of a current account surplus.

Foreign exchange reserves are expected to grow by about 13 per cent to reach $51 billion in 2026. In addition, crude oil production, excluding condensates, is assumed to average around 1.5 million barrels per day during the period under review.

The macroeconomic outlook also referenced concerns around unrecovered debt, noting how it is undermining economic growth even more significantly than inflation itself, highlighting broader structural challenges facing the economy.

However, the document warned that higher-than-anticipated pre-election spending ahead of the 2027 general elections, as well as extra-budgetary expenditures, could pose significant risks to the inflation outlook for 2026 if not carefully managed.