How Election Spending Could Derail Nigeria's Economic Recovery

The Centre for the Promotion of Private Enterprise (CPPE) has warned that rising political and electioneering activities ahead of the 2027 general election could threaten Nigeria’s fragile economic recovery, fuelling inflation, raising foreign exchange demand and distracting policymakers from urgent reforms.

Contents

EDITOR’S PICKS

Recovery Intact, But Fragile
Gains Yet to Reach Ordinary Businesses

A Call for Deeper Reforms
FURTHER READING

In its half-year economic outlook released on Sunday, the think tank, led by CEO Muda Yusuf, said the growing intensity of political activity presents “an important downside risk” to the economy in the second half of the year. It warned that election-related spending could inject fresh liquidity into the system, worsening inflationary pressure and putting more strain on the naira.

EDITOR’S PICKS

LAWMA Can’t Save Lagos From Its Waste Crisis. Here’s Who Can

Beyond the immediate financial risks, CPPE cautioned that policymakers could lose focus on economic governance and structural reforms as political attention shifts toward the 2027 polls, potentially stalling fiscal and institutional initiatives that are still in progress.

Recovery Intact, But Fragile

Despite the warning, CPPE maintained that Nigeria’s economy would likely continue its gradual recovery in the second half of 2026, driven by financial services, telecommunications, construction, trade and oil refining.

The organisation also projected that inflation would stay well below 2025 levels, with exchange rate stability supported by stronger dollar inflows, improved reserves and better market confidence.

But the think tank was careful to frame this recovery as fragile rather than secure, one that political spending and disruption could easily unsettle if left unmanaged.

Gains Yet to Reach Ordinary Businesses

CPPE’s report also highlighted a widening gap between macroeconomic stability and the real experience of businesses and households. It said the improvements recorded at the macro level have not translated into better productivity, job creation or living standards.

The organisation pointed to a familiar list of constraints still weighing down businesses: high interest rates, expensive energy, poor electricity supply, weak transport infrastructure, logistics inefficiencies and persistent insecurity. These, CPPE said, continue to limit investment and productivity despite the calmer macroeconomic picture.

It also flagged procurement delays, funding gaps and debt-service obligations as factors slowing down government capital spending, reducing how much impact fiscal policy can have on real economic activity.

“Macroeconomic stabilisation has not yet led to significant, broad-based improvements in productivity, competitiveness, employment and household welfare,” the report said, adding that businesses are still grappling with elevated costs and structural bottlenecks.

A Call for Deeper Reforms

CPPE argued that stable macroeconomic indicators, while important, are not enough on their own. It called for the next phase of government reform to focus squarely on cutting production costs, improving productivity and making Nigerian businesses more competitive.

Specifically, the think tank urged government to improve electricity supply, upgrade transport and logistics infrastructure, strengthen security in farming communities, and expand access to affordable long-term financing. It also called for faster budget implementation, warning that delays continue to blunt the effectiveness of government spending.

On revenue generation, CPPE cautioned against government leaning on new taxes to shore up its finances. Instead, it recommended that additional revenue come from efficiency-driven reforms, a signal that further tax hikes could deepen the pressure already facing struggling businesses.