CFG Advisory has warned that the fiscal gains from Nigeria’s fuel subsidy removal have been fully absorbed by debt servicing, leaving the Federal Government with little capacity to fund development projects or deliver meaningful social interventions.
The advisory firm said this reality weakens the reform narrative around subsidy removal and raises concerns about the sustainability of the government’s current fiscal strategy.
The warning was disclosed at the monthly forum of the Finance Correspondents Association of Nigeria (FICAN), where CFG Advisory presented its 2026 economic outlook titled “Nigeria 2026 Economic Forecast: The Urgency of Now – Reforms Lead to Productivity-Led Growth.”
The bi-monthly forum is intended to assess Nigeria’s economic outlook for the 2026 budget year.
Speaking at the event, CFG Advisory’s Chief Executive Officer, Tilewa Adebajo, said the redirection of subsidy savings to debt servicing has effectively neutralised the intended fiscal relief.
“The entire benefit of fuel subsidy removal is now being absorbed by debt service,” Adebajo said. “This leaves the government with very limited room to address growth, infrastructure, or social protection.”
He added that Nigeria’s public debt, now estimated at over $100 billion, has reached unsustainable levels and is placing severe pressure on public finances.
Adebajo pointed to the structure of the proposed 2026 budget, which allocates N15.52 trillion to debt servicing. This figure exceeds the combined allocations to key sectors such as security, defence, education, and health, which together stand at N14.97 trillion.
“When debt service alone is higher than what you spend on education, health and security combined, it is a clear signal of fiscal stress,” he said.
According to CFG Advisory, excessive fiscal spending, persistent budget deficits, and the weak impact of social intervention programmes have heightened frustration among households and businesses.
“The economy is showing classic signs of stagflation,” Adebajo noted. “Costs are high, growth is weak, and confidence is fragile.”
The firm also cautioned that Nigeria’s political calendar could complicate economic management in 2026, with election-related pressures potentially slowing reform momentum.
“Election cycles tend to weaken fiscal discipline,” Adebajo warned. “There is a real risk that reform momentum slows just when it is most needed.”
While acknowledging potential gains from improved military cooperation with the United States, CFG Advisory stressed that sustainable recovery would require stronger coordination across monetary, fiscal, trade, and industrial policies.
“You cannot run these policies in silos and expect productivity-led growth,” he said.
CFG Advisory identified persistent underfunding of capital expenditure as a major structural weakness. Capital budgets, historically key drivers of growth, continue to be crowded out by recurrent spending and debt obligations.
CFG Advisory identified persistent underfunding of capital expenditure as a major structural weakness. Capital budgets, historically key drivers of growth, continue to be crowded out by recurrent spending and debt obligations.
The firm referenced warnings from the World Bank and IMF over Nigeria’s budget expansion, which stands at about 56% year-on-year, urging alignment with realistic revenue projections.
“When budgets grow far faster than revenues, the gap is inevitably filled with debt,” the report noted.
To address rising debt levels, CFG Advisory called for urgent fiscal reforms, including asset sales, privatisation, and concessions. It recommended selling down to at least 49% of government interests in 74 licensed concession assets, potentially raising about $50 billion to reduce debt and recapitalise NNPC.
Despite the challenges, the firm projected GDP growth of about 5% in 2026, single-digit inflation, an MPR below 20%, and an exchange rate of N1,400–N1,500 per dollar, while stressing that growth remains well below the 8–10% needed to meaningfully reduce poverty.
“Reforms must have a human face,” CFG Advisory concluded, calling for restored social interventions and deliberate policies to drive inclusive growth.