KPMG: Political Spending to Birth Inflation, FX Instability, Cost Pressures in 2026

Kayode Tokede 

Analyst at KPMG has said that political spending towards 2027 general elections will give birth to inflation, foreign exchange instability and cost pressures in 2026, stressing that cautious wait-and-see  sentiment may dominate the way investors approach the Nigerian market. 

Speaking to shareholders’ right groups at audit committee seminar 2026 in Lagos, Partner, Strategy & Customer Solutions, Advisory Service, KPMG West Africa, Mr. Oluwole Adelokun stated that international pressure and strategic support for Nigeria’s counter-insurgency campaign will increase, but risks of sabotage remain due to election dynamics.

According to him, counter-insurgency campaign could impact operational continuity and people safety for businesses with high geographical spread. 

Adelokun, who was speaking on, “2026 Budget and Macro-economy Review,”   further stressed that 2026 would test the federal government’s resolve and discipline in macro-economic reform execution amid risks of reforms slippage and political spending ahead of the 2027 election.  

He stated  that Nigeria’s economy is expected to maintain its resilience and deliver sustained growth in 2026, stressing that the economy is expected with a forecast growth rate of 4.5 per cent this year.

“Suppoorting this outlook are less-restrictive credit conditions  amid easing inflationary pressures, expectations of sustained stability of the Naira, higher investments, sustained stability in oil production and expansionary fiscal spending in the eve of election,” he said. 

He noted that inflation is expected  to decline to an annual average of approximately 11per cent-13 per cent by 2026, while the Naira is expected to remain stable at an average of N1,400 per dollar in 2026.  

In another presentation titled, “AI Governance & Ethics,” Mr. Lawrence Amadi , Partner, Tech Risk, PwC stated that AI has become embedded in core processes and  it begins to shape how risk emerges and how decisions are made.

“Risk is no longer driven by politics, processes and controls, but also by models, data and automated decision logic.   This does not make AI a threat; it makes it a critical enterprises capacity that  must be well-governed,” he said..

He noted that key messages to the audit committee that include shareholders  are that AI is a strategic enabler,  increasingly embedded in core banking decisions, stressing that as AI shapes decisions, it also shapes enterprises’ risk and must be well governed. 

“The audit committee   plays a critical role in the enabling responsible, trusted use of AI,” he added.   

According to him, the roadmap for designing and implementing an AI governance framework include appointing an AI governance committee, educating and increasing awareness, integrating risk management & internal contents and evaluation of current state. 

In  his presentation titled, “Nigeria Tax Act: Implications for Corporate Businesses and Investors,” Mr. Olugfemi Babem, who is the Partner, Tax at KPMG stated the new Tax Reforms Act is meant to unify and modernise the Nigerian tax laws;  strengthen compliance and enhance compliance measures and consolidate all collection of federal revenue under the Nigeria Revenue Service (NRS). 

He, however, urged the shareholders  to identify key areas of new tax law and evaluate risk and opportunities. He also maintained that shareholders are to identify potential courses of actions and execute in a move to respond to the new tax law.