A recent assessment by Afrinvest indicates that while the National Assembly's approval of an additional $6 billion in external borrowing might have a justifiable economic basis, it presents substantial challenges to the nation's fiscal prudence.
The financial analyst firm also highlighted that a prolonged conflict in the Middle East poses a significant threat to Nigeria's already precarious food security, primarily through its impact on fertiliser supply and costs.
Afrinvest's report points out that escalating costs for agricultural inputs and altered shipping routes are likely to drive up global prices for essential commodities. The firm has called upon the federal government to implement policy measures aimed at bolstering food security.
The March 2026 edition of the Afrinvest Monthly Market Report, which examines global and Nigerian economic and financial landscapes, issued a specific warning: a price increase of 20% to 30% for fertilisers could lead to a 10% to 20% decrease in application rates, a trend observed historically between 2022 and 2023.
Furthermore, the report anticipates that increased operational expenses will compel businesses to either pass these costs on to consumers or reduce their production levels.
A coordinated approach involving both government and private sector entities is necessary to effectively tackle the emerging fertiliser crisis, the report suggested.
Policymakers should prioritise ensuring fertiliser remains affordable, especially at the start of the planting season, through targeted support like input subsidies and tax incentives for domestic manufacturers.
In March 2026, Nigeria's foreign exchange reserves experienced a 0.5% month- on-month decrease, settling at $49.4 billion. This decline was attributed to global risk aversion, influenced by events in the Middle East, which led to capital flight from emerging markets, thereby diminishing foreign investment inflows. Elevated oil prices did not significantly boost the country's foreign exchange earnings.
Afrinvest also noted that the Central Bank of Nigeria's (CBN) new policy permitting International Oil Companies (IOCs) to fully repatriate their export proceeds contributed to the reduction in reserves.
Regarding the foreign exchange market, the Naira depreciated by 1.7% month-on- month against the US dollar, trading at N1,386.72 per dollar in the official market (NAFEM). In the parallel market, the Naira saw a 3.5% depreciation, closing the month at N1,415.00 per dollar.
A particular point of concern for Afrinvest is the pending assent to the proposed 2026 budget of N58.2 trillion, which the National Assembly later increased to N68.3 trillion. This delay raises questions about the legal and fiscal foundation for the current borrowing activities.
The report elaborated that this concern is heightened by the fact that the 2025 provision for external borrowing of N1.8 trillion (approximately $1.2 billion) has already been surpassed by the $2.4 billion Eurobond issued in November 2025.
Even if the borrowing is justifiable under the 2026–2028 Medium-Term Expenditure Framework (MTF), the Naira equivalent of the new borrowing, amounting to N8.3 trillion, is more than double the N3.6 trillion external borrowing allocated for 2026 in the MTF. This disparity prompts questions on whether the borrowing constitutes a supplementary request for the 2025 budget or an early expansion of the fiscal plan for 2026, which has not yet been approved.
Recent improvements in Nigeria's debt-to-GDP ratio, reaching 38% in mid-2025 partly due to GDP rebasing, could be quickly eroded if borrowing continues to outpace revenue generation.
According to data from the Debt Management Office (DMO), Nigeria's total public debt stood at N153.3 trillion as of the third quarter of 2025. The federal government accounts for roughly 91.0% of this total, marking an increase of about N65.5 trillion since mid-2023.
While borrowing remains a viable strategy to enhance fiscal capacity, its long-term sustainability hinges on its allocation to productive investments that generate value. In theory, Nigeria should benefit from the current high global oil prices. However, persistent structural issues, including oil theft, pipeline vandalism, and an unappealing regulatory environment for substantial capital investment, continue to limit oil production below budgeted targets, preventing the country from fully capitalising on potential revenue windfalls.
Given these circumstances, Afrinvest reiterates the necessity for stricter adherence to approved fiscal frameworks for borrowing, enhanced oversight from the legislature, and greater fiscal discipline. Ultimately, Nigeria's macroeconomic stability will depend not only on global trends but also on the consistency, credibility, and discipline of its domestic policy decisions.
Nonetheless, Afrinvest advises businesses, particularly in the agricultural and related manufacturing sectors, to strengthen their procurement processes through advance contracts and supplier diversification. They should also focus on optimising input efficiency and bolstering working capital reserves to manage fluctuations in fertiliser prices.
Historically, fertiliser prices have closely mirrored energy benchmarks. During the Russia-Ukraine conflict, urea prices more than tripled at their peak, influenced by energy price shocks and supply chain disruptions. Current market conditions suggest a higher risk of a price surge—estimated between 10.0% and 30.0%—rather than a physical shortage.
Natural gas, which constitutes 60.0% to 80.0% of ammonia production costs, is the primary channel through which price changes are transmitted. Phosphate fertilisers depend on sulphur and ammonia, both linked to supply chains in the Gulf region. Although major producers like Morocco and North America are not entirely reliant on routes passing through the Strait of Hormuz, increased input costs and rerouted freight are likely to elevate global benchmark prices.
The report stressed that the celebratory atmosphere surrounding President Bola Tinubu's significant state visit to the United Kingdom, the first by a Nigerian leader in 37 years, may hold symbolic diplomatic value but offers little comfort regarding Nigeria's macroeconomic situation at the close of the first quarter of 2026, which ended on a negative note.
Afrinvest further emphasised that the implications for Nigeria are varied. While domestic manufacturers like Dangote Fertiliser Limited and Indorama Eleme Fertiliser & Chemicals can maintain urea production, Nigeria imports over 70.0% of its phosphate and nearly all its potash, according to the National Bureau of Statistics (NBS). This dependence creates a cost-push effect for NPK fertiliser production, as local manufacturers face escalating input costs, foreign exchange challenges, and potential strain on their working capital.
With Nigeria's annual fertiliser consumption estimated at 6.5–7.0 million metric tonnes, predominantly NPK used by smallholder farmers, a 20.0–30.0% rise in fertiliser prices could lead to a 10.0–20.0% reduction in application rates, based on historical data from 2022–2023.
For essential crops like maize, rice, and palm oil, a decrease in NPK application could result in yield reductions of up to 15.0–20.0%, given the importance of balanced nutrient application.
In such a scenario, farmers might opt for urea (nitrogen-only fertilisers), reduce the area they cultivate, or postpone planting. This could have significant ripple effects across agro-allied sectors, leading to tighter raw material availability and increased cost volatility.
Vulnerable regions, particularly in Northeast Nigeria, remain disproportionately exposed. While a global fertiliser shortage might not occur, Nigeria faces an elevated risk of a fertiliser affordability crisis, potentially leading to reduced agricultural output and renewed pressure on food inflation in the medium term.
These pressures are already affecting the manufacturing sector, especially within agro-allied value chains. Rising input costs are driving up raw material inflation for food processors and Fast-Moving Consumer Goods (FMCG) companies. Historical evidence supports this risk: in 2022, major FMCG companies like BUA Foods, Dangote Sugar, and Honeywell Flour experienced significant increases in their cost-of-sales ratios following fertiliser price shocks.
Considering that industry cost structures are already burdened, averaging around 70.0%, due to the combined effects of foreign exchange depreciation and energy price liberalisation since mid-2023, further increases in input costs are likely to compress profit margins, forcing companies to either pass on costs to consumers or cut back on production.
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