LCCI NEW YEAR ECONOMIC STATEMENT

BEYOND STABILITY: MAKING 2026 THE YEAR OF INCLUSIVE GROWTH

As Nigeria enters 2026, the Lagos Chamber of Commerce and Industry (LCCI) reflects on 2025 as a year marked by tough reforms, economic resilience, and cautious stabilization, characterized by modest growth recovery, constrained fiscal execution, and rising concerns about debt sustainability. While GDP growth strengthened relative to 2024, budget implementation reflected transition-related execution pressures, and public debt dynamics continued to pose significant risks to fiscal resilience, particularly due to elevated debt-service obligations.

Difficult but necessary adjustments following the removal of fuel subsidies, liberalization of foreign exchange, and aggressive monetary tightening also marked the year. While these reforms imposed significant short-term pain on households and businesses, they also laid the foundation for restoring macroeconomic credibility, rebuilding investor confidence, and repositioning the economy for sustainable growth.

Key Economic Actions that Reshaped Nigeria in 2025

Several landmark policy actions reshaped Nigeria’s economic landscape in 2025. The rebasing of GDP to 2019 and CPI to 2024 by the National Bureau of Statistics provided a more accurate picture of the economy, accurately reflecting the expanding digital sector, domestic refining, and structural shifts following the removal of subsidies. Economic growth strengthened modestly, with GDP expanding by 3.98% in Q3 2025, primarily driven by the services sector, which now accounts for over half of national output.

Nigeria’s exit from the Financial Action Task Force (FATF) grey list marked a significant reputational and financial milestone, restoring confidence in the

economic system and improving access to global capital. The oversubscribed Eurobond yield and the positive rating by S&P Global are recent testaments. These were complemented by far-reaching financial sector reforms, including banking and insurance recapitalization, the signing of the Investment and Securities Act, and the transition to a T+2 settlement cycle in the capital market, all of which enhanced market integrity, efficiency, and resilience.

Fiscal reforms also gained momentum with the signing of the Tax Reform Act in June 2025, which consolidated multiple tax laws into a unified framework set to take effect on January 1, 2026. On the real sector front, the expansion of domestic crude refining capacity, led by the Dangote Refinery, significantly reduced fuel import dependence, eased pressure on foreign exchange demand, and altered the inflation dynamic, even as competitive tensions reshaped the downstream petroleum market.

Economic growth in 2025 showed only marginal improvement and remained insufficient to lift incomes or reduce poverty in a meaningful way. Average GDP growth of 3.78 percent in the first three quarters of 2025 exceeded the 3.47 percent recorded in 2024, with Q3 growth rising to 3.98 percent. However, this performance remains below Nigeria’s population growth rate, underscoring that current growth is not inclusive and that the government must urgently address structural bottlenecks limiting productivity across key sectors.

The 2025 budget did not deliver the scale or quality of fiscal stimulus required to support economic recovery. As of Q3 2025, revenue performance stood at ₦18.6 trillion (61 percent of the target), while expenditure reached ₦24.66 trillion (60 percent of the target). Capital budget implementation was particularly weak, with only ₦3.10 trillion, about 17.7 percent, released by Q3, reflecting continued prioritization of outstanding 2024 projects. This level of capital execution significantly constrained infrastructure delivery, private sector confidence, and the growth impact of fiscal policy.

Nigeria’s public debt position was a significant concern. As of June 2025, the total public debt had risen to approximately ₦152.39 trillion, with debt-to-GDP ratios estimated to be between 37.5% and 45% following the GDP rebasing. While these ratios appear moderate statistically, the underlying fiscal reality is troubling, as debt servicing absorbs over 65 percent of government revenue. This severely limits the government’s capacity to fund infrastructure, social services, and growth-enhancing investments, making revenue expansion and more prudent borrowing non-negotiable.

Despite these reforms, Nigerian businesses suffered significant challenges that constrained growth and competitiveness in 2025:

a. Nearly half of businesses identified inflation as their greatest challenge. Although headline inflation decelerated sharply from about 34 percent to 14.5 percent by November, elevated food, transport, and energy costs continued to erode household purchasing power and compress business margins.

b. Persistent FX volatility and earlier naira depreciation significantly increased import costs for raw materials and capital goods, complicating planning and weakening manufacturing and trade activities despite improvements in FX transparency.

c. Widespread insecurity, particularly in food-producing regions, disrupted supply chains, worsened food inflation, discouraged investment, and undermined rural economic activity.

d. Persistent power shortages, poor transport networks, and logistics inefficiencies raised operating costs and forced businesses to rely on expensive alternatives, limiting productivity.

e. Inconsistent policies, multiple taxation, and regulatory unpredictability heightened uncertainty, constrained long-term investment decisions, and weakened the ease of doing business.

Focus for 2026

As we move into 2026, the LCCI urges the government to consolidate the gains of reform while decisively addressing the structural constraints that limited inclusive growth in 2025. We commend the foreign exchange policy reforms that have instilled transparency and stability in the operations of the FOREX market. This is helping businesses access more FOREX for their critical raw material imports and calming import-induced inflationary pressures.

First, sustained coordination between fiscal and monetary authorities is critical to entrench disinflation while gradually easing interest rates to unlock private sector credit and stimulate investment. Special attention must be paid to food supply chains through improved security, targeted support for agriculture, and better rural infrastructure.

Second, foreign exchange market confidence should be deepened by promoting export diversification, supporting non-oil exporters, and sustaining transparent, market-driven FX policies.

Third, the government must prioritize infrastructure development, particularly power, transport, and logistics, through public-private partnerships to reduce the cost of doing business and enhance competitiveness.

Fourth, effective and transparent implementation of the Tax Reform Act is essential to simplify compliance, reduce the burden on productive enterprises, and broaden the tax base without stifling growth.

Finally, policies must deliberately focus on inclusive growth by rebuilding household purchasing power, supporting pro-poor investments, strengthening social safety nets, and accelerating job creation, especially for youth and SMEs.

The LCCI believes that 2025 represented a turning point, from crisis management to cautious stabilization. The challenge for 2026 is to move beyond stability and translate macroeconomic reforms into broad-based prosperity. A particular area of focus should be the intentional effort towards boosting credit to the private sector through the banks, even as we expect to see more rates easing by the Central Bank of Nigeria.

With disciplined policy execution, enhanced security, infrastructure expansion, and a strong focus on inclusivity, Nigeria can make 2026 the year when the benefits of reform are finally felt by businesses and households alike.

Engr. Leye Kupoluyi

President

Lagos Chamber of Commerce and Industry

Wednesday 31st December 2025.