After declining for four consecutive months, Nigeria’s foreign exchange reserves are beginning to rise gradually amid low oil prices. The country’s external reserves stood at $37.9 billion at the end of April, a drop attributed to a significant decline in crude oil prices, which fell by 16.74 percent this year, from $73.29 per barrel on January 2 to $62.78 per barrel as of May 31.
The ongoing decline in oil prices is linked to the decision by the Organisation of the Petroleum Exporting Countries (OPEC) and allies, including Russia, to increase production by nearly one million barrels per day (1 mbbl/d) from April to June. This decline is shaped by a delicate balance of supply-side adjustments, demand uncertainties, and strategic manoeuvres from influential players like Saudi Arabia.
At $50 per barrel and a production level of 1.5 million barrels per day (mbpd), Nigeria’s oil revenue is set to fall 10 percent short of its fiscal breakeven point. This shortfall could push the fiscal deficit to six to seven percent of GDP, exacerbating inflationary pressures. The depletion of the country’s external reserves by 5.91 percent this year, from $40.88 billion in January 2 to $38.47 billion on May 29, was further exacerbated by Nigeria’s fluctuating oil production.
The oil production, which averaged 1.54 mbd in January, dropped to 1.47 mbd and 1.4 mbd in February and March, respectively, before recovering to 1.49 mbd in April. This contributed to putting pressure on the country’s external reserves. However, things appear to be looking up again, with a steady rise in reserves from $37.93 billion on April 14 to $38.46 billion on May 29, thanks to the Central Bank of Nigeria’s countermeasures aimed at mitigating the impact of the global oil crisis on the domestic economy.
The apex bank is implementing measures to enhance Nigeria’s export potential by promoting backward integration principles to reduce the import of items that can be produced locally, as well as simplifying dollar remittances to the domestic economy for Nigerians in the diaspora. Drawing from China’s economic strategy, the Central Bank stated that Nigeria’s competitive exchange rate can drive export-led growth.
To maximise this potential, businesses are expected to pursue export-oriented strategies focusing on high-growth sectors such as agriculture, manufacturing, and creative industries. Additionally, strengthening domestic production through import-substitution models can reduce reliance on expensive imports and enhance economic resilience. A shift towards value addition—moving from raw material exports to processed goods—will further boost foreign exchange earnings.
The CBN Governor, Olayemi Cardoso, highlighted Nigeria’s expanding creative sector, noting its potential to generate $25 billion annually. He pointed to untapped opportunities in music, film, crafts, and digital exports as key drivers of economic growth. Cardoso encouraged businesses to tap into international markets, leverage digital platforms, and embark on global promotional tours to boost dollar-denominated revenue inflows.
In a related move, Cardoso recently urged telecommunications companies to reduce their reliance on imports by localising the production of key input components. His proposal for backward integration in the telecom sector comes at a critical time, as Nigeria’s real sector grapples with the urgent need for sustainable growth. Cardoso outlined the potential economic benefits of this strategy, emphasising its role in enhancing local capacity, creating jobs, and conserving foreign exchange.
During a visit from Airtel Africa’s management team, led by Group CEO Sunil Taldar, Cardoso stressed that local production would alleviate pressure on the dollar, create jobs, and enhance Nigeria’s economy. He highlighted the importance of producing key materials currently imported, such as SIM cards, cables, and towers, noting that over the past 16 months, the apex bank had worked to stabilise the foreign exchange market, strengthen the naira, and attract investors.
In response, Airtel Africa’s CEO, Sunil Taldar, commended the CBN’s reforms and expressed support for local production, stating it would benefit telecom companies in the long run. Other analysts have noted the renewed interest of Foreign Portfolio Investors in the forex market, driven by improved market confidence, a more efficient FX framework, and strengthening macroeconomic conditions.
Additionally, the Central Bank of Nigeria’s continued market interventions are expected to consistently support the stability of the naira. According to the Nigerian Communications Commission, the total number of active telephony subscribers rose by 3.2 percent month-on-month to 164.93 million in December 2024, reflecting a gradual recovery in the subscriber base after the completion of the NIN-SIM linkage programme by mobile service providers in September.
Breaking down market share by operators, MTN Nigeria maintained its lead with 51.4 percent (84.61 million subscribers), followed by Airtel Nigeria with 34.4 percent (56.62 million subscribers). Globacom held 12.2 percent (20.14 million subscribers), while 9mobile accounted for 2.0 percent (3.28 million subscribers). In December, the total number of internet subscribers increased by two percent month-over-month, reaching 139.28 million.
Looking ahead, analysts at Cordros Securities anticipate a rebound in subscriber numbers, driven by SIM reactivation efforts—particularly by market leaders such as MTN Nigeria and Airtel Nigeria. The Executive Secretary of the Association of Licensed Telecommunication Operators of Nigeria, Gbolahan Awonuga, stated that, in addition to telecom operators, other key business owners and entrepreneurs could also invest in the local manufacturing of essential components for telecom operations.
“We must look inwards and get Nigerian companies to produce these key components in telecom operations locally. The government also has a role to play by ensuring that key infrastructure, especially power, is available. We do not want a situation where locally produced inputs will become more expensive than imported versions,” he asserted.
The Research Head at Cowry Asset Management Limited, Charles Abuede, added that the CBN governor’s call aims to curb the importation of foreign services, advocating instead for local development of such services to strengthen the domestic economy. “The high demand for foreign exchange by telecom operators has further pressured the naira due to increased demand for the dollar. However, with adequate infrastructure development and a conducive operating environment facilitated by regulators, these challenges can be mitigated.”
Under Cardoso’s leadership, the CBN has implemented several measures to enhance the efficiency of the foreign exchange market. These efforts have yielded significant results, with the average daily turnover in the Nigerian Autonomous Foreign Exchange Market surging by 226 percent in the first half of last year compared to the same period in 2023. During this time, foreign portfolio inflows rose by over 72 percent, while foreign exchange reserves increased from $32 billion in May 2023 to over $40 billion, reinforcing market stability and investor confidence.
These outcomes signal growing confidence in the reforms he has implemented. “In addition, we witnessed a $6 billion current account surplus in the first half of 2024 as a result of the impact of these reforms. Reduction in petroleum product imports supported by improved domestic refining capacity, a growing focus on non-oil exports, and higher remittance inflows helped to support the positive current account balance,” he said.
Additionally, a supportive policy environment has resulted in a doubling of monthly remittances, rising from an average of $300 million in 2023 to nearly $600 million in August 2024. To encourage diaspora remittances and strengthen naira stability, the CBN recently announced the launch of two new financial products aimed at Nigerians living abroad.
The apex bank introduced the Non-Resident Nigerian Ordinary and Investment Accounts to streamline remittances, boost diaspora investment, and promote financial inclusion. It noted, “The Central Bank of Nigeria is pleased to inform the general public of the introduction of the Non-Resident Nigerian Ordinary Account and Non-Resident Nigerian Investment Account targeted at Nigerians in the diaspora.”
The initiative also aims to offer a safe, efficient platform for fund management and investment in Nigeria’s financial markets. The President of the Association of Bureaux De Change Operators of Nigeria, Dr. Aminu Gwadabe, emphasised that diaspora remittances serve as a vital source of foreign exchange for Nigeria, complementing both foreign direct investment and portfolio inflows.
He argued that the CBN’s initiatives have sustained growth in remittance inflows, in line with its goal to double formal remittance receipts within a year. Gwadabe noted that remittances were expected to rise further, driven by the CBN’s ongoing efforts to restore confidence in the foreign exchange market, build an inclusive banking system, and maintain price stability—key pillars for long-term economic growth.
In a report titled “Diaspora Remittances: The Power Behind Africa’s Sustainable Growth,” Mohamed Touhami el Ouazzani, Western Union’s Regional Vice President for Africa, emphasised the transformative impact of remittances. He highlighted that while remittances are tracked through financial flows, their true value lies in the lives they improve. In 2023 alone, $90 billion was sent to Africa from its diaspora—an amount comparable to the GDP of some nations.