Disinflation remained evident across major economies in 2025, reflecting the lingering impact of sustained monetary tightening. This improvement occurred even as global uncertainty intensified, driven by renewed trade tensions and escalating geopolitical conflicts in the Middle East and Europe. Overall, global growth is expected to moderate slightly to 3.2% from 3.3% in 2024, with average inflation down to 4.2% from 5.8% in the prior year.
In the markets, heightened volatility and policy uncertainty triggered a rotation toward defensive assets, most notably lifting gold to a 62.1% gain over the year. Nevertheless, investor positioning was not fully risk-off. Cryptocurrencies attracted strong speculative inflows in the first half of the year, although momentum faded in H2 as fundamental overshadowed speculative trading.
Looking ahead, the IMF projects global growth to ease further to 3.1% in 2026, remaining below the pre-pandemic average of 3.4% despite continued disinflation. The balance of risks is expected to shift away from inflationary pressures toward trade-driven growth headwinds, with global trade volume growth forecast at 2.3%, the weakest outcome since 2023 (1.0%).
On The Domestic Front
On the domestic front, Nigeria’s 2025 macroeconomic narrative reflects a cautiously optimistic reset. The rebasing of key indicators – Gross Domestic Product (GDP) and the Consumer Price Index (CPI) – alongside the gradual dissipation of disruptions from the mid-2023 structural reforms, supported improved growth momentum, exchange-rate stability, and firmer inflation anchoring. These headline improvements are signals of an economy jumping-starting a new growth cycle post-structural reform. However, rising fiscal constraints risk undermining this progress.
Nigeria is heading into 2026 with the federal budget still in “patch-up” phase, following repeated extensions of the 2024 capital expenditure (CAPEX) implementation to December 2025. As a result, execution of the 2025 CAPEX has lagged significantly, with only about 24.8% of the ₦23.4tn allocation expected to be implemented by year-end, leaving a sizable rollover into an uncertain 2026 fiscal framework. This misalignment reflects persistent revenue underperformance, fuelled partly by overly ambitious assumptions, and on the other hand, escalating expenditure pressures.
Notably, while the FG celebrated gross non-oil revenue collection overperformance in 9M:2025 (₦24.2tn versus ₦20.0tn budgeted), oil revenue component – projected to account for 50.3% of the ₦40.9tn total revenue target – likely underperformed by at least 24.0%, given average output of 1.66mbpd and an oil price of $70.92/bbl. as against 2.06mbpd and $75.00/bbl. budgeted. A notable insight from the 2026 budget presentation speech of President Bola Ahmed Tinubu to the National Assembly on December 19, 2025, was that actual revenue as of the end of Q3:2025, ₦18.2tn, trailed budgeted pro-rata by 40.7%. The immediate consequence of this development is the overshooting of the estimated fiscal deficit for the year by 5.7% to ₦14.8tn at the end of Q3.
Looking ahead, effective fiscal management will be critical to sustaining the economic recovery, particularly amid pre-election dynamics and a resurgence in security challenges. Nonetheless, we project growth to strengthen to 4.3% in 2026, supported by improved inflation anchoring, FX stability, and sustained private-sector investment, particularly in the oil & gas, telecommunications, and agriculture sectors.
Shifting gears, Nigeria’s fixed income market in 2025 was characterised by disciplined policy management, cautious supply conditions, and a gradual but meaningful disinflation trend, which together drove a moderation in yields and a recovery in total returns. Despite easing inflation, liquidity conditions remained structurally tight for most of the year due to active sterilisation by the CBN, elevated domestic funding needs, and episodic liquidity shortages, keeping short-term market rates anchored near policy bounds.
Yield moderation in 2025 was uneven across the curve. Repricing was concentrated in the belly segment (2Y–7Y), where improving inflation dynamics and strong institutional demand supported yield compression. In contrast, long-end yields remained relatively sticky, reflecting persistent fiscal supply considerations and limited scope for aggressive duration-led repricing. As a result, bond market performance was driven primarily by carry and roll-down effects rather than broad-based price appreciation.
On the supply side, the FG leaned heavily on the domestic market, with NT-Bills accounting for the bulk of domestic borrowing amid large rollover requirements. While issuance volumes were managed cautiously, demand remained robust, reinforcing elevated short-end premia and keeping NT-Bills yields above FGN bond yields for most of the year.
Looking Ahead to 2026
Looking ahead to 2026, the fixed income landscape is expected to remain selective. Inflation moderation, stabilising policy expectations, and disciplined issuance provide support for returns; however, heavy domestic funding needs and active liquidity management by the CBN are likely to keep system liquidity structurally constrained. Market performance is therefore expected to favour carry efficiency, roll-down strategies, and medium-tenor positioning, with gradual scope for duration re-engagement contingent on the pace of policy easing and the balance between yield compression and inflation dynamics.
Meanwhile, global equity markets delivered strong performances in 2025, with developed markets gaining 18.9% as inflation eased and sustained momentum from the AI-led technology boom continued, despite bouts of volatility triggered by trade policy uncertainties. Emerging and Frontier markets outperformed with returns of 27.7% and 36.5%, respectively, supported by improved global liquidity and renewed investor appetite for higher-growth economies. African equities led globally with an average return of 39.7%, underpinned by stronger investor confidence and improved currency stability, while the NGX-ASI extended its bullish run, rising 45.2% YTD as of mid-December 2025.
After a subdued start due to high fixed-income yields, sentiment improved on the back of robust earnings, dividends, policy support, and bargain hunting, resulting in heightened market participation, with July and September standing out as peak activity months driven by strong earnings releases and increased interest in insurance stocks following the enactment of the NIIRA Act.
Our outlook for FY:2026 is constructive, anchored by favourable macroeconomic and market dynamics. In our base case scenario, we project a 40.9% gain in the NGX-ASI, supported by sustained price and naira stability, gradual monetary policy easing, improved corporate earnings, elevated pre-election liquidity, and aggressive capital mobilisation by insurance companies and PFAs, with additional upside from anticipated listings such as Dangote Petrochemicals. Upside risks include sharper disinflation and stronger FX inflows, while downside risks stem from renewed inflationary pressures, FX volatility, weak foreign participation, and delays in expected listings.
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