Economy

Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, has said federal allocations alone could not guarantee prosperity for states, urging them to develop sustainable sources of revenue and strengthen their productive capacity. Oyedele said Nigeria recorded about N15.8 trillion in savings from fuel subsidy removal and foreign exchange reforms between June 2023 and December 2025. However, he explained that the money was shared among the Federal, state and local governments and was not a huge pool of cash retained by the Federal Government. He said the reforms had increased monthly Federation Account allocations from between N300 billion and N600 billion before 2023 to more than N2 trillion. The minister urged states to diversify their economies, improve internally generated revenue and focus on production, investment and job creation rather than depending heavily on federal allocations. He also explained that the Federal Government continued to borrow because its revenues remained insufficient to meet its growing obligations, including wages, debt servicing, infrastructure and electricity subsidies.

At least 78 Ministries, Departments and Agencies (MDAs) of the Federal Government have allocated nearly ₦400 billion in the 2026 budget for the construction and rehabilitation of community halls, mosques, traditional rulers’ palaces, village market squares and civic centres. An analysis of the budget shows that more than half of the allocation is earmarked for projects considered non-developmental, including the distribution of grains, motorcycles and tricycles, sponsorship of community thrift societies, and the construction of museums and mini-stadia. The affected MDAs include the Defence Headquarters, Nigerian Air Force, Nigerian Defence Academy, Technical Aid Corps, Federal Ministry of Information and National Orientation, Federal Ministry of Industry, Trade and Investment, Office of the Auditor-General for the Federation, National Building and Road Research Institute (NBRRI), National Productivity Centre and several research institutions. Economic analysts have criticised the spending pattern, arguing that the projects do not reflect Nigeria’s most pressing development priorities given the country’s current fiscal challenges. They contend that allocating hundreds of billions of naira to numerous small-scale projects reduces funding available for critical sectors such as healthcare, education, security, roads, power and other infrastructure capable of delivering broader economic benefits. The experts also warned that many of the projects have little connection to the statutory responsibilities of the agencies executing them, raising concerns about transparency, accountability and fiscal discipline. For example, the National Building and Road Research Institute’s 2026 budget includes the construction of village halls in Anambra State, an international market in Jigawa State, traditional rulers’ palaces in Rivers and Kogi states, market stalls in Borno State, a multipurpose hall in Kaduna State and the renovation of mosques in Kebbi, Ekiti and Jigawa states. The combined value of these projects exceeds ₦4 billion, despite having no direct link to the institute’s mandate. Similarly, the National Productivity Centre’s budget provides for projects such as support for Ijaw musicians, the construction of an Emir’s palace in Yobe State, an econometrics laboratory in Ekiti State, the refurbishment of traditional rulers’ palaces in Ogun State and the construction of an abattoir in Gombe State. The National Mathematical Centre is also expected to finance the construction of a Sociology Department building at Ahmadu Bello University, Zaria, a project many observers say falls outside its core responsibilities. Consultant economist and former central banker Chukwunonso Ihuma blamed the situation on weak legislative oversight, alleging that lawmakers often insert projects into agency budgets that have little developmental value. He called for a return to zero-based budgeting, where every expenditure must be justified from scratch, and urged the Budget Office of the Federation to reject projects that do not align with national priorities or the mandates of the affected agencies. According to Ihuma, projects such as markets, traditional rulers’ palaces and civic centres are typically the responsibility of state and local governments rather than federal agencies. President Bola Tinubu signed the ₦68.32 trillion 2026 Appropriation Act into law in April and also extended the implementation period for the 2025 budget to June 30, 2026. The Senate later approved a further extension of the capital component to September 30, 2026, to allow ongoing projects to be completed. The Nigerian Institute of Social and Economic Research (NISER) said effective implementation of the budget would require stronger fiscal coordination, improved revenue generation and structural reforms to address inflation, exchange rate volatility and economic inequality. Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, said the government’s decision to discontinue reliance on the Central Bank’s Ways and Means financing had created additional fiscal pressure, making revenue generation more challenging. He also questioned the realism of the 2026 budget assumptions, which project ₦36.87 trillion in revenue, oil production of 1.84 million barrels per day, an oil benchmark of $75 per barrel, GDP growth of between 4.28 and 4.68 per cent, and ₦15.81 trillion for debt servicing. Media strategist Umar Sani noted that while lawmakers sometimes include constituency projects in the budget, the executive does not always implement them, leading to disagreements over budget execution. He added that previous administrations had rejected appropriation bills containing projects they considered unnecessary, stressing the need for more disciplined budgeting that prioritises national development.

Senior policymakers, financial experts and business leaders from across Africa have gathered in Abuja for the seventh African Emerging Markets Forum, where discussions are centred on strengthening the continent’s resilience amid rising global economic uncertainty. The forum, taking place at the headquarters of the Central Bank of Nigeria (CBN), has attracted top government officials, including CBN Governor Oluyemi Cardoso, National Security Adviser Nuhu Ribadu and Chairman of the Nigeria Revenue Service, Zacch Adedeji. Participants from several African countries are attending the event, while the Director-General of the World Trade Organization, Ngozi Okonjo-Iweala, is also expected to participate. Held under the theme, “Building Resilience Amidst Geoeconomic Uncertainties,” the forum is providing a platform for policymakers, economists and financial experts to discuss strategies for navigating global and domestic economic volatility, while exploring ways to increase investment and deepen financial inclusion across the continent. In his welcome address, the CBN Deputy Governor for Corporate Services, Muhammad Abdullahi, acknowledged the growing pressure that global economic developments have placed on emerging markets. Despite the challenges, Abdullahi said the current economic climate presents an opportunity for African countries to strengthen their fiscal and monetary policies. He noted that while ongoing disruptions in global markets continue to affect developing economies, they also offer a chance to implement reforms that could improve economic stability and long-term growth.

Nigeria continues to suffer significant economic losses from illicit financial flows (IFFs), with an estimated $17.8 billion leaving the country annually, according to recent findings presented at a capacity-building workshop organised by the Africa Network for Environment and Economic Justice (ANEEJ). The organisation revealed that Nigeria lost between $90 billion and $108 billion through illicit financial flows between 2020 and 2025. Data from the Federal Government, the African Union (AU), and the United Nations Economic Commission for Africa (UNECA) indicate that Africa loses about $88 billion each year to illicit financial flows, with Nigeria accounting for roughly 20 per cent of those losses. Major drivers of the illicit outflows include crude oil theft and illegal bunkering, trade mispricing through inflated import invoices and undervalued exports, tax evasion, profit shifting by multinational companies, corruption, money laundering, and illegal cross-border financial transfers. These practices deprive the country of much-needed revenue for critical sectors such as education, healthcare, and infrastructure while weakening public institutions and discouraging investment. The International Monetary Fund (IMF) has repeatedly expressed concern over the scale of illicit financial flows from Nigeria. IMF Managing Director Kristalina Georgieva urged Nigerian authorities to strengthen efforts to trace illicit funds and eliminate fiscal leakages, warning that the growing trend continues to worsen the country’s revenue challenges. Financial intelligence agencies have also identified Nigeria as a key transit point for illicit financial transactions. According to Interpol Vice President Garba Umar, hundreds of thousands of dollars are allegedly laundered out of Nigeria every hour through various illegal channels, posing a threat to national security and economic stability. Analysts say the proceeds from illicit financial flows often finance organised crime and other unlawful activities, making it essential for authorities to strengthen enforcement measures. Reports also indicate that Nigeria’s banking sector has played a significant role in facilitating illicit financial transactions over the years. Experts have therefore called on the Central Bank of Nigeria (CBN) to tighten regulatory oversight and close loopholes that enable illegal fund transfers, while urging the Economic and Financial Crimes Commission (EFCC) to intensify investigations and collaborate with international counterparts to track and recover stolen assets. In addition, experts have highlighted the role of offshore tax havens, shell companies, anonymous trusts, and other secret financial structures in facilitating illicit financial flows. Previous reports by Global Financial Integrity (GFI) and the Nigeria Extractive Industries Transparency Initiative (NEITI) have similarly raised concerns about capital flight and money laundering involving Nigerian institutions. Stakeholders say sustained enforcement, stronger financial regulations, international cooperation, and the prosecution of offenders remain critical to reducing illicit financial flows and protecting Nigeria’s economic resources.

The federal government’s naira-for-crude policy appears to be facing a major setback following Dangote Petroleum Refinery’s decision to begin selling petroleum products in US dollars, a move that could have far-reaching implications for fuel prices, inflation, transport costs and the value of the naira. Rather than being viewed as a routine commercial decision, the refinery’s move is widely seen as a sign of the government’s inability to sustain the much-publicised naira-for-crude initiative. It also highlights the continued vulnerability of Nigeria’s domestic fuel market to fluctuations in the foreign exchange market, despite the country’s growing refining capacity. Effective July 13, 2026, Dangote Refinery fixed the ex-depot price of Premium Motor Spirit (PMS) at $0.779 per litre, diesel at $1.087 per litre, and aviation fuel at $0.942 per litre. The company also cancelled all previously issued invoices denominated in naira. The decision followed the refinery’s increasing reliance on crude oil purchased in dollars after supplies under the federal government’s naira-for-crude arrangement reportedly became insufficient. Dangote Refinery, a $20 billion investment and the world’s largest single-train refinery, has a refining capacity of 650,000 barrels per day, enough to meet Nigeria’s domestic fuel demand while exporting surplus refined products across Africa. However, industry reports indicate that the refinery received only seven domestic crude cargoes in May, far below its monthly requirement of between 13 and 15 cargoes. The shortfall forced the company to import a significant portion of its crude feedstock in dollars, exposing it to exchange-rate risks. At the current official exchange rate of about N1,380 to one US dollar, the refinery’s new PMS price translates to approximately N1,075 per litre before transportation costs, depot margins, regulatory charges and marketers’ profits are added. Although the immediate impact on pump prices may appear limited, analysts say the bigger concern is that petrol prices are now directly linked to movements in the foreign exchange market. For instance, if the exchange rate weakens to N1,500/$, the base cost of petrol would rise to about N1,169 per litre before additional charges. At N1,600/$, the cost would increase further to roughly N1,246 per litre. This means Nigerians could face higher fuel prices even if global crude oil prices and refining costs remain unchanged, simply because of a weaker naira. Ironically, this is the exact scenario the naira-for-crude initiative was designed to prevent. Introduced in 2024, the policy aimed to supply domestic refiners with crude oil in naira in order to reduce demand for foreign exchange, strengthen local refining, conserve foreign reserves and stabilise domestic fuel prices. Industry observers now argue that inconsistent implementation has significantly weakened those objectives. Professor Emeritus of Petroleum Economics, Wumi Iledare, said Dangote Refinery had simply announced the price at which it was willing to sell its products in a deregulated market. According to him, aligning revenues with the same currency used to purchase crude oil is a commercially sound response to foreign exchange exposure rather than an attempt to fix prices. While acknowledging the economic logic behind the decision, Iledare noted that Nigeria’s downstream petroleum market is still far from fully competitive. With state-owned refineries yet to operate at optimal capacity and imported fuel remaining expensive, Dangote Refinery has emerged as the country’s dominant supplier. As a result, a pricing decision by a single refinery can quickly have nationwide economic consequences. Industry stakeholders have also expressed concern over the development. The Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) warned that conducting fuel transactions in dollars could encourage the gradual dollarisation of the Nigerian economy. Similarly, the Independent Petroleum Marketers Association of Nigeria (IPMAN) cautioned that marketers would now have to compete for scarce foreign exchange, increasing pressure on the naira and exposing fuel prices to greater volatility. Reports also indicate that some depot operators have already increased loading prices by as much as N113 per litre in anticipation of higher replacement costs. The implications could extend beyond the petroleum sector. According to the National Bureau of Statistics (NBS), Nigeria’s headline inflation stood at 15.93 per cent in May 2026, while food inflation was 16.96 per cent. Fuel remains one of the country’s biggest inflation drivers because road transport accounts for the movement of most goods and passengers across the country. In addition, thousands of manufacturers, hospitals, schools and small businesses continue to rely on petrol and diesel-powered generators due to unreliable electricity supply. Consequently, any sustained increase in fuel prices is expected to push up transportation costs, food prices, production expenses and the overall cost of living. The latest development has also exposed what many analysts describe as a contradiction in the government’s energy reform agenda. The federal government promoted the naira-for-crude policy as a key strategy for reducing pressure on foreign exchange, strengthening energy security and stabilising domestic fuel prices. However, it failed to ensure the consistent supply of crude oil to local refiners in naira, a condition widely regarded as essential to the policy’s success. Once refiners were forced to source more crude in dollars, Dangote Refinery’s decision to switch to dollar-denominated sales became a commercial necessity rather than a voluntary choice. Ultimately, the refinery has acted in line with standard business practice by matching its revenue with the currency in which most of its costs are incurred. Analysts argue that the larger issue lies not with the refinery’s decision but with the policy inconsistencies that made it unavoidable. Unless the federal government urgently restores a transparent and reliable framework for supplying crude oil to domestic refiners in naira, experts warn that local refining alone may not guarantee lower fuel prices. Instead, the cost of petrol at filling stations could increasingly depend less on refining activities in Lekki and more on fluctuations in the value of the naira against the US dollar.