Market News

By : Geoff Iyatse, Joesph Chibueze

• MTEF signals shift toward fiscal realism, budget credibility, says CPPE • Late approval recipe for weak budget scrutiny

For the third consecutive time since President Bola Tinubu assumed office, the Federal Government has activated the budgeting process behind the stipulated timeline, reversing the modest gains in efforts to achieve a January-to-December budgeting cycle.

Last week’s Federal Executive Council’s (FEC) approval of the 2026–2028 Medium Term Expenditure Framework/Fiscal Strategy Paper (MTEF/FSP) is not only a procedural lapse or a blatant breach of the Fiscal Responsibility Act (FRA) – a legal document that seeks to institute fiscal discipline. It also appears to consolidate the casualisation of the yearly budget – the holy grail of public financing.

Already, the MTEF/FSP parameters do not suggest that the Federal Government is at the point where it would begin to recognise the significance of a budget. First, the oil production benchmark, pegged at 1.8 million barrels per day (mbpd), which the government intends to adopt for 2026, is a generous markup on current production.

Nigeria has seen a modest and steady growth in crude production. But the speed is still behind the ambitious target, as continued in the MTEF/FSP document being considered. In the third quarter, the output level averaged 1.64 mbpd.

Also, a new outlook by BMI, a Fitch Solutions company, is betting on 1.73 mbpd in 2026, a slight expansion on this year’s estimated 1.7 mbpd production.

The estimate is also far ahead of the Organisation of Petroleum Exporting Countries (OPEC) quota for the country, which has remained at 1.5 mbpd for much of the year.

As in the previous budget, the price benchmark is neither conservative nor canon of budgeting. Whereas the government is forecasting an average price of $64.85, the international benchmark price is currently trading below $64 even as JPMorgan said it could dip to $58 next year.

Though Nigeria’s Bonny Light currently trades above $70, the FG could be more conservative with its benchmark, especially considering the level of volatility the market has witnessed in recent times.

Even the exchange rate does not seem to have reflected the trading direction of the naira in the past year. Whereas the local currency has gained over 15 per cent year-to-date, the government opts for a downside trend going into the new year with an exchange rate projection of N1,512/$.

If naira, with a slightly higher moving average in the past four months, continues to gain as some market insights and experts project, naira could rally to above N1400/$ next year, leaving a gaping hole in monetised earnings of the government.

The exchange rate projection raises questions about the level of expertise involved in the development of the MTEF/FSP. With the seemingly spurious assumptions, the government is hoping to increase its equity funding in the N54-trillion expenditure to N34.33 trillion next year. The figure is nearly 500 per cent of the total revenue the government earned in 2023, the last fully reported budget year.

Like the 2025 budget, which the government only said would start full implementation in September, the 2026 budget may not put an end to the hastily passed and poorly executed appropriation.

By approving the MTEF/FSP document barely weeks to a new financial year, a fragrant disregard for the provision of the FRA which stipulates the document should be transmitted to the National Assembly at least three months before the end of the current budgeting cycle, the Federal Government has shown a troubling disregard for the FRA and an even more worrisome indifference to the damage such irresponsibility inflicts on the economic planning. The pattern has now become a symbol of chronic executive complacency, some critics have noted.

The consequences may not be anything short of disaster as the exercise that previously required careful interrogation is now being reduced to a frantic, box-ticking ritual.

Lawmakers who should be drilling ministries, departments and agencies (MDAs), questioning projections and validating revenue assumptions are now forced to race through a document that determines the fate of a N54 trillion spending and the public lives of over 200 million citizens.

As shown by the previous appropriations, every rushed approval increases the chance of unrealistic parameters, budget ‘padding’, which came to light during the previous administration and unreasonable project allocations.

At best, the timelines would be compressed if the 2026 budget makes it to the National Assembly this year, a challenge that could strip the National Assembly of any meaningful oversight, turning the legislature into an accessory in the budgeting process and depriving it of the benefit of rigorous debate on the details.

For the economy, the ripple effects of hurried budgeting or poor execution are severe – businesses, investors and state governments, which depend on clarity from the FG to plan their own fiscal year, adopt a wait-and-see posture. This translates to delayed investment, postponed recruitment and slowed economic growth.

But even in the face of the uncertainty and delay, the Centre for the Promotion of Private Enterprise (CPPE) has described the MTEF/FSP approved by FEC as a shift toward fiscal realism and budget credibility.

The CPPE in a policy brief made available to The Guardian over the weekend said by adopting more cautious revenue and expenditure assumptions, the new MTEF/FSP strengthens the foundation for improved budget credibility and more sustainable fiscal outcomes.

The document signed by the Chief Executive Officer of CPPE, Dr Muda Yusuf, however, noted that though the shift is significant, it does not go far enough, particularly regarding crude oil price and output assumptions.

It said that persistent revenue underperformance, rooted in overly optimistic macroeconomic assumptions, remains one of the most significant weaknesses of Nigeria’s budgeting process. This, it says, has repeatedly resulted in wide gaps between appropriations and actual implementation, weakening fiscal discipline and undermining public trust.

As a way out, CPPE said, “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 and improved implementation efficiency.

“If sustained, these reforms will help entrench macroeconomic stability, rebuild public confidence, and enhance the credibility of the budget process.”

The Centre, however, frowned at the late presentation of the MTEF/FSP to the National Assembly, saying: “The FRA mandates that the MTEF/FSP 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/FSP is therefore not in alignment with the Act.” It noted that timely submission is crucial to enabling informed legislative scrutiny, evidence-based debate and smooth preparation of the annual budget.

“Going forward, strict adherence to the provisions of the Act is essential for strengthening fiscal governance,” it noted. Other analysts say this late submission of MTEF/FSP has been the reason for the late presentation of the budget, a hurried consideration by the National Assembly and poor implementation.

They say the delay has grave implications for businesses as well as state governments, who are waiting on budget parameters to make informed economic decisions and funding estimates.

Prof. Godwin Oyedokun of Lead City University said ordinarily, committees hold revenue hearings, engage MDAs, review fiscal assumptions, and make adjustments over several weeks. “With December already here, lawmakers effectively have days, not weeks, to scrutinise the MTEF/FSP if the government still wants to meet the January-December budget cycle tradition.  He noted that the normal process, budget defence by MDAs, committee harmonisation, and report adoption usually requires four to six weeks.

“With this delay, lawmakers may have less than two weeks to finish the entire exercise if the government insists on signing the 2026 Budget into law by January 1,” Oyedokun said, adding that many observers will see it as an ambush of the National Assembly because compressing the fiscal timetable places legislators in a position where they cannot carry out proper scrutiny without clashing with the executive’s timeline.

Any attempt to insist on deeper review risks political backlash or public perception that they are “stalling” the budget, he said.

“This creates the impression of pressure tactics, making the approval process look rushed and one-sided with grave consequences, including weak revenue validation, because a rushed MTEF/FSP review means key revenue projections, oil benchmarks, tax assumptions, and borrowing plans may not be properly interrogated. That increases the risk of unrealistic expectations and mid-year budget failures.

“MDAs also get limited time to defend their budgets. That often leads to inflated proposals escaping detection, inadequate alignment of spending with national priorities, and reduced capacity to block inefficiencies or duplication,” he added.

He said oversight is strongest when committees have time to question, compare, analyse, and negotiate, noting that compressing timelines reduces parliament to a “rubber stamp,” damaging institutional balance and accountability.

“Investors, development partners, and credit rating bodies watch procedural discipline closely. A rushed budget signals institutional weaknesses and undermines confidence in the country’s fiscal governance,” he said.