CBN reforms drive FX inflows amid global oil slump

With global oil prices plunging to around $64 per barrel, well below Nigeria’s $75 budget benchmark, the country faces renewed fiscal and foreign-exchange pressures. Yet, through sweeping Central Bank of Nigeria reforms, foreign-exchange inflows are rebounding. By promoting non-oil exports, diaspora remittances, and local production while rebuilding reserves, the CBN is shielding the naira from oil shocks, stabilising markets, and repositioning Nigeria for sustainable growth despite mounting global economic uncertainties, SAMI TUNJI reports

Nigeria’s heavy dependence on oil revenue has left its 2025 budget vulnerable, as crude prices hover well below the $75 benchmark, raising fiscal and exchange-rate risks. Sami Tunji writes on how the Central Bank of Nigeria has implemented reforms to boost foreign-exchange inflows through higher non-oil exports, local production, and stronger reserves, helping the naira stabilise even as global oil markets remain uncertain.

Global oil prices have fallen to around $64 per barrel, far below the $75 benchmark adopted for Nigeria’s 2025 budget. For a country that depends on crude oil for most of its export earnings and a significant amount of its government revenue, this slide poses a serious risk. The Wall Street Journal’s forecast that Brent crude could slip below $50 per barrel before the end of 2025 has further unsettled expectations.

Nigeria’s fiscal projections are built on an oil production assumption of two million barrels per day. Current figures from the Nigerian Upstream Petroleum Regulatory Commission show actual production fluctuating between 1.5 and 1.8 million barrels per day. That shortfall, combined with weaker prices, means the government is likely to miss its oil revenue target by several trillion naira. Economists warn that this could push the fiscal deficit towards seven per cent of Gross Domestic Product, placing pressure on the exchange rate and complicating efforts to contain inflation.

At a time when global demand is weak and OPEC+ is considering modest output increases to stabilise its members’ budgets, Nigeria’s position remains fragile. Earlier in July 2025, the International Monetary Fund noted that Nigeria must urgently revise its budget targets or face a deepening financial crisis. The IMF’s most recent Article IV consultation report highlighted a significant risk that Nigeria will exceed its fiscal deficit projections for the year, driven by a combination of falling oil prices, lower production levels, and challenges in capital expenditure execution. It called on the Nigerian authorities to take immediate action to recalibrate the country’s fiscal policies and budget expectations to reflect the current economic realities.

To prevent renewed foreign-exchange instability, the Central Bank of Nigeria, under Governor Olayemi Cardoso, has introduced and implemented reforms to protect the economy from the oil slump. The CBN’s strategy targets stronger non-oil exports, backward integration in major industries, better management of diaspora remittances, and tighter control of imports. These steps are designed to build buffers for the naira and reduce dependence on crude oil proceeds.

Speaking at the 54th Annual General Meeting of the Manufacturers Association of Nigeria, Apapa Branch, the CBN Governor urged manufacturers to lead efforts to diversify Nigeria’s forex earnings from crude oil dependence. Cardoso, who was represented by the Head of Division, Trade & Exchange Department of the CBN, Mr Aliyu Ashiru, stressed that manufacturing held significant potential to conserve forex, expand exports with value-added products, create jobs at all levels, and enhance macroeconomic stability.

He said, “Incentives such as tax holidays, duty waivers for machinery, export rebates and investment guarantees should target manufacturers producing for export markets. Nigeria must move from exporting raw materials to value-added products.”

Reform measures boosting FX inflows

The CBN’s first line of action has been to rebuild Nigeria’s foreign-exchange reserves. Figures from the apex bank show that gross external reserves rose from $38.9bn in April to $43.4bn by October 2025, about a six-year high. The reserves now provide import cover for about eleven months, up from seven months at the start of the year. Analysts at United Capital Research have expressed optimism that Nigeria’s external reserves will continue their steady ascent in the final quarter of 2025, buoyed by stronger oil export receipts, robust diaspora remittances, and a favourable trade balance.

Speaking on recent developments in the FX market at the IMF/World Bank annual meetings in Washington, D.C., Cardoso in charge of Economic Policy, Dr Mohammed Abdullahi, said the average monthly turnover in the foreign-exchange market rose to $8.6bn in 2025 compared with $5.5bn in the previous year. He explained that “capital flows, which collapsed by over 75 per cent between 2019 and 2020, have improved significantly and strengthened our external position.” He also said the market is now more transparent, noting that the CBN has become a net buyer rather than a net supplier of foreign exchange.

Another part of the reform involves promoting non-oil exports. The Nigerian Export Promotion Council reported that non-oil exports grew by about 19.59 per cent in the first half of 2025 to $3.23bn, driven by higher global demand for cocoa, urea, and cashew. The shipment volume also rose to 4.04 million metric tonnes from 3.83 million metric tonnes in the first half of 2024, driven by strong global demand for Nigerian products from emerging markets such as India, Brazil, Vietnam, and other African countries.

Earlier in March 2025, Cardoso said the creative industry could earn up to $25bn annually if properly supported. He urged investors in film, music, crafts, and digital services to tap international platforms to raise dollar earnings.

Also, the CBN has prioritised import substitution through backward integration. During a meeting in February 2025 with the Airtel Africa management team led by Group Chief Executive Officer Sunil Taldar, Cardoso urged telecommunications operators to produce key inputs such as SIM cards, cables, and masts locally. He said the dependence on imported components has placed unnecessary pressure on the naira and limited job creation.

In response, Taldar commended the reforms and said Airtel supports local manufacturing. He also pledged the firm’s continued investment in digital infrastructure and financial inclusion. Analysts see this as an example of how monetary policy is now intersecting with industrial policy to address structural weaknesses.

Head of Research at Cowry Asset Management Limited, Charles Abuede, believes the CBN Governor’s emphasis on local production is consistent with the broader macroeconomic goal of reducing foreign dependence.

“The high demand for foreign exchange by telecom operators has placed pressure on the naira due to increased dollar demand,” he said.

Recent data indicate that the reforms are gaining traction. The naira gained N33.50 against the dollar in the official foreign-exchange market in October, supported by rising external reserves, which climbed to $43.17bn during the month. Data released by the CBN showed that the naira ended the month at a record high of N1,421.73/$1 on Friday, marking its fourth consecutive all-time strong level since the introduction of the Nigerian Foreign Exchange Market under the Electronic Foreign Exchange Management System. This represented a month-on-month appreciation of 2.4 per cent from the N1,455.23 quoted at the beginning of the month, indicating sustained demand moderation and improved liquidity in the FX market.

In the external sector, the balance of payments turned positive for the first time in years. The CBN reported a surplus of $6.83bn in 2024, supported by a goods trade surplus of $13.17bn and strong remittance inflows of $20.93bn. Imports declined during the period, reflecting both weak demand and the impact of policy tightening.

Also, the CBN’s latest Quarterly Statistical Bulletin revealed that total foreign-exchange utilisation across the economy increased by 19 per cent quarter-on-quarter to $9.3bn in the first quarter of 2025, representing a 39 per cent year-on-year growth. The rise was driven mainly by a surge in invisible transactions, such as services and transfers, which grew by 54 per cent quarter-on-quarter to $4.5bn. This category’s share of total FX usage expanded to about 48 per cent, up from 37 per cent in the fourth quarter of 2024.

These numbers indicate that the country is gradually rebuilding foreign-exchange buffers. Analysts at FBNQuest added that ample liquidity and attractive yields in the domestic market have supported robust investor participation in government securities auctions, further strengthening market stability and investor confidence in the naira.

Cardoso told investors at the annual IMF and World Bank meetings in Washington that Nigeria is witnessing “a complete restructuring of the economy”. He said the naira has become competitive and that large businesses are beginning to shift from imports to exports. He also noted that the country now has a positive trade balance expected to reach six per cent of GDP in the medium term. “We were very fortunate that a lot of the things that needed to be done were implemented earlier,” he said, adding that the decisions have created “resilience against potential shocks.”

With inflation moderating to below 18.02 per cent in the near term and GDP growth projected at about four per cent in 2025, Nigeria’s economy is finally stabilising. Officials say the foreign reserve level is sufficient to maintain a stable exchange-rate environment. The CBN also expects the forthcoming $2.3bn Eurobond issuance by the Federal Government to refinance existing debt and further strengthen reserves.

However, economists caution that while short-term indicators are encouraging, the long-term sustainability of the reforms will depend on how well they are coordinated with fiscal measures. Oil revenue still provides a significant share of budget financing, and oil exports remain a major source of foreign exchange, meaning Nigeria continues to be exposed to oil price movements.

Sustaining buffers through structural discipline

As the global oil market remains uncertain, maintaining economic buffers will be critical. OPEC+ is expected to review its production strategy at its November meeting, and any increase in supply could push prices lower. With Brent crude already near $64 per barrel, a further slide would deepen fiscal stress for producers such as Nigeria.

Analysts say the country must not treat the recent rise in reserves as an end in itself but as a temporary cushion that should buy time for deeper structural change. Export diversification remains limited, and the service sector, though promising, requires stronger linkages to international markets. The creative industry’s earning potential will depend on copyright enforcement, access to finance, and digital infrastructure.

Fiscal policy also needs realignment. The 2025 budget is based on revenue projections that are unlikely to be met if oil prices remain below $70. The government may have to increase non-oil tax revenue and cut low-impact spending to avoid expanding the deficit. Otherwise, inflationary pressures could return, undermining the CBN’s efforts to stabilise prices.

In a recent remark, G-24 Chairman Pablo Quirno noted that recent adverse shocks in the global economy have left growth below pre-pandemic levels, with rising policy uncertainties creating substantial medium-term headwinds.

“Emerging markets and developing economies have faced deteriorating terms of trade, reduced export volumes, and declining foreign currency earnings. Many of these countries have implemented domestic policies to mitigate uncertainty, but constrained policy space underscores the urgent need for collective solutions supported by multilateral institutions,” he said.

His comment shows that Nigeria’s challenges are not unique but part of a wider global pattern.

Cardoso has acknowledged that building a resilient economy requires more than monetary measures. Speaking at the Washington investors’ forum, he said the difficult economic reforms embarked on by the Federal Government are yielding positive results, as evidenced by stable exchange rates, more substantial economic buffers, and a dip in inflation. According to Cardoso, the apex bank has helped build a stronger economy. He explained that maintaining policy discipline will be key to preventing the gains from being reversed.