…The 2026 oil price benchmark of $64.85 per barrel, down from $75 in the 2025 budget, also reflects a more cautious approach.
…Exchange Rate Assumptions Reflect Macro Risks and Pre-Election Pressures
Dr Muda Yusuf
MON DEC 08 2025-theGBJournal| The recently presented highlights of the 2026–2028 Medium-Term Expenditure Framework (MTEF) by the Minister of Budget and National Planning, Senator Abubakar Atiku Bagudu, signal a welcome and deliberate shift toward more conservative, realistic, and credible fiscal planning.
The framework responds to heightened global uncertainties, Nigeria’s domestic fiscal pressures, recurring missed revenue targets, the pre-election dynamics expected in 2026, and the longstanding challenges around oil production and oil-price volatility.
By adopting more cautious revenue and expenditure assumptions, the new MTEF strengthens the foundation for improved budget credibility and more sustainable fiscal outcomes. However, the shift—though significant—does not go far enough, particularly regarding crude oil price and output assumptions.
A Partial Shift Away from Revenue Optimism
Persistent revenue underperformance—rooted in overly optimistic macroeconomic assumptions—remains one of the most significant weaknesses of Nigeria’s budget process.
This has repeatedly resulted in wide gaps between appropriations and actual implementation, weakening fiscal outcomes and undermining public trust.
The unrealistic assumptions of the 2025 budget were particularly damaging, contributing to implementation shortfalls and widening credibility gaps.
The emerging shift toward more realistic assumptions in the 2026–2028 MTEF is therefore commendable. It represents an important step toward reducing variances between projected and realised outcomes and toward restoring the budget as a credible governance tool rather than a routine, ceremonial annual document.
More Realistic Oil Production and Oil Price Benchmarks
One major improvement in the new MTEF is the introduction of dual oil production parameters:
-Technical production target: 2.06 mbpd
-Benchmark (budget) production: 1.80 mbpd
Using 1.80 mbpd as the revenue basis is significantly more prudent than the 2.06 mbpd used in the 2025 budget, especially given chronic underproduction, vandalism, theft, and operational bottlenecks.
However, based on historical production trends, the CPPE proposes an even more conservative benchmark of 1.6 mbpd to ensure fiscal resilience.
The 2026 oil price benchmark of $64.85 per barrel, down from $75 in the 2025 budget, also reflects a more cautious approach. Nonetheless, even this estimate is still somewhat optimistic, given global forecasts:
-U.S. Energy Information Administration [EIA]: $55/barrel
-Goldman Sachs: $56/barrel
-World Bank: $60/barrel
These projections are driven by expectations of increased global supply, moderating demand, and rising inventories. Aligning Nigeria’s benchmark closer to $60/barrel would strengthen the MTEF’s resilience.
Exchange Rate Assumptions Reflect Macro Risks and Pre-Election Pressures
The benchmark exchange rate of N1,540/$ acknowledges likely liquidity pressures arising from the 2026 election cycle and broader macroeconomic dynamics. This assumption provides a realistic basis for planning around:
-FX-linked capital projects
-Contract price variations
-Imported input costs
-Broader implementation risks
Although a weaker naira increases project costs, it simultaneously boosts naira-denominated revenues. This benchmark, therefore, provides a credible basis for fiscal planning.
Growth Projection and Revenue Outlook
The GDP growth projection of 4.68%, though optimistic, remains largely aspirational and does not materially distort fiscal planning.
More importantly, the 2026 revenue projection of N34.33 trillion—a 16% reduction from the N36.35 trillion projected for 2025—reflects a more grounded assessment of Nigeria’s revenue conditions despite ongoing tax and administrative reforms. This downward adjustment is a welcome sign of improved fiscal prudence.
Debt Sustainability Remains a Critical Concern
The MTEF projects and allocates ₦15.91 trillion to debt service in 2026, representing 46% of projected revenue. This level of debt-service commitment significantly limits fiscal space for:
-Infrastructure investment
-Social sector spending
-Security and stabilisation programmes
Nigeria’s rising debt trajectory underscores the urgent need for:
-A renewed focus on debt sustainability
-Stronger domestic revenue mobilisation
-Greater efficiency, cost-effectiveness, and accountability in public expenditure
Delayed Presentation of the MTEF
The Fiscal Responsibility Act mandates that the MTEF be submitted to the National Assembly at least four months before the start of the next fiscal year. The delayed presentation of the 2026–2028 MTEF would significantly constrain the diligence of deliberations because of the limitation of time.
Timely submission is crucial to enabling:
-Informed legislative scrutiny
-Evidence-based debate
-Smooth preparation of the annual budget
Going forward, strict adherence to the provisions of the Act is imperative for strengthening fiscal governance.
The Role of the National Assembly
The National Assembly plays a decisive role in safeguarding fiscal realism. National legislators are strongly advised to resist pressures to:
-Inflate expenditure estimates
-Expand the budget without credible revenue backing
-Reintroduce unrealistic macroeconomic assumptions
Budget credibility depends not only on Executive proposals but also on the Legislature’s commitment to evidence-based decision-making.
Conclusion
The 2026–2028 MTEF marks a positive step toward embedding fiscal realism, strengthening budget credibility, and aligning national expenditure with Nigeria’s real implementation capacity.
For Nigeria’s budget process to evolve into a truly effective tool of governance—rather than an annual procedural formality—both the Executive and the Legislature must uphold the principles of:
-Realistic and evidence-based assumptions
-Transparent and credible fiscal planning
-Discipline in public expenditure
-Improved implementation efficiency
If sustained, these reforms will help entrench macroeconomic stability, rebuild public confidence, and enhance the credibility of the budget process.
DR MUDA YUSUF, Director/CEO, CENTRE for the Promotion of Private Enterprise (CPPE)
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