• 20 Jun, 2025
• Faith Kegh
• No comment

Oil Price Surge Strengthens Nigeria’s Forex Reserves and Naira Stability.

The Central Bank of Nigeria (CBN) is reinforcing efforts to strengthen foreign reserves, stabilize the naira, and ensure steady access to dollars. These efforts come amid a global spike in oil p

rices, driven by renewed tensions between Israel and Iran, which has pushed Brent crude above \$75 per barrel—the highest level since February.

This oil rally is offering Nigeria a valuable opportunity to improve its foreign exchange earnings and reduce volatility in the naira. West Texas Intermediate (WTI) crude also saw a 10% surge, reaching \$74 per barrel.

Experts warn that ongoing instability near the Strait of Hormuz—an essential oil transit route—could lead to prolonged supply disruptions and further price hikes. As an oil-dependent economy, Nigeria stands to benefit significantly, with rising oil revenues helping to boost reserves and ease pressure on the local currency.

Notably, Nigeria’s current oil price has surpassed the Federal Government’s 2024 benchmark of \$75 per barrel. Alongside this, the country is experiencing its strongest quarterly GDP growth in over a decade—4.6% in Q4 2024—driven by economic reforms led by CBN Governor Olayemi Cardoso.

     Policy Reforms and Economic Recovery

Governor Cardoso has implemented a series of structural changes aimed at improving economic fundamentals. These include reforms to correct historical imbalances, reduce inflation, and stabilize food prices. As a result, net foreign reserves have increased fivefold, while the naira has shown steady appreciation in the currency market.

Cardoso’s broader economic vision focuses on reducing dependency on oil and encouraging diversified export growth. Inspired by models like China’s, the CBN is promoting value-added exports in sectors such as agriculture, manufacturing, and the creative industries. The goal is to build industrial capacity and generate sustainable foreign exchange inflows.

    Support for Local Manufacturing and Telecom Integration

As part of this shift, the CBN is pushing for local production in critical sectors. During a recent meeting with Airtel Africa CEO Sunil Taldar, Cardoso encouraged telecom firms to begin manufacturing essential components—such as SIM cards and network equipment—within Nigeria. This strategy is expected to reduce foreign exchange demand, create jobs, and stimulate domestic innovation.

Taldar welcomed the initiative, stating Airtel’s commitment to deepening local operations and advancing digital inclusion.

The Nigerian Communications Commission (NCC) also reported growth in telecom subscribers, with active mobile users rising to over 164 million and internet users reaching 139 million as of December 2024. Market leaders like MTN and Airtel are expected to drive further recovery through SIM reactivation programs.

Industry leaders, including ALTON Executive Secretary Gbolahan Awonuga, emphasized the importance of domestic production in reducing costs and boosting sector resilience. He also stressed the need for reliable infrastructure—especially power supply—to make local manufacturing viable.

     Strengthening the Creative and Digital Economy

Cardoso has also spotlighted the creative industry, noting its potential to generate up to \$25 billion annually. He encouraged musicians, filmmakers, and digital entrepreneurs to expand into global markets, leveraging technology, tours, and international partnerships to increase export earnings.

Foreign investor confidence is beginning to rebound, with a 72% rise in foreign portfolio inflows and average daily turnover in the FX market more than doubling in the first half of 2024. Foreign reserves now stand at over \$40 billion—the highest in nearly three years—providing eight months of import cover.

     Impact on Fiscal Stability and Oil Revenue Goals

Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), noted that higher oil prices positively impact forex liquidity, government revenue, and exchange rate stability. He also sees improved fiscal conditions potentially lowering Nigeria’s budget deficit and public debt levels.

Analysts at Afrinvest agree that Nigeria’s oil revenue target of N19.5 trillion for 2025 is now more achievable. They recommend channeling increased revenues into infrastructure and security while also curbing oil theft to reach the 2.06 million barrels per day production target.

     Conclusion: Path to Sustainable Growth

With global oil prices working in its favor and policy reforms gaining traction, Nigeria is seeing renewed momentum toward macroeconomic stability. From boosting exports to encouraging local manufacturing and supporting digital innovation, the CBN’s strategic shift under Governor Cardoso is laying the groundwork for a more resilient and diversified economy.

Faith Kegh

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