Nigeria’s Economic Outlook
Nigeria’s economy is receiving renewed support from rising global oil prices, growing foreign reserves, and increased investor confidence, creating stronger prospects for fiscal stability and currency strength.
With Brent crude trading around $69 per barrel, above the Federal Government’s 2026 budget benchmark of $64.8, the development is expected to improve government revenues, strengthen foreign exchange reserves, and enhance exchange rate stability.
Analysts warn that a major disruption to the Strait of Hormuz — a critical route for about 20 per cent of global oil supply — could push oil prices sharply higher, potentially reaching between $91 and $150 per barrel within weeks if geopolitical tensions escalate.
The recent rally in oil prices has been driven largely by growing geopolitical tensions, particularly concerns that the United States could take military action against Iran, a key oil producer. Additional supply disruptions, including outages in Kazakhstan and weather-related production challenges in the United States, have also contributed to the upward price trend.
Higher oil prices are particularly beneficial to Nigeria, where oil accounts for more than 80 per cent of foreign exchange earnings. The increase provides a major boost to government revenues, strengthens external reserves, and supports overall economic stability.
The positive outlook is already reflecting on the naira, which recently strengthened below the N1,400 per dollar mark at the official market for the first time in over a year.
Data from the Central Bank of Nigeria showed that the Nigerian Foreign Exchange Market rate improved to N1,396.99 per dollar on Thursday, up from N1,400.48 recorded a day earlier. This marks a significant recovery from weaker levels of N1,422.07 and N1,421.63 seen in January.
The naira also gained value in the parallel market. According to Cowry Asset Management Limited, the currency appreciated by 1.06 per cent to N1,454 per dollar, reflecting growing confidence across both official and informal segments of the foreign exchange market.
President of the Association of Bureaux De Change Operators of Nigeria, Aminu Gwadabe, said the naira has remained relatively stable in recent months, ending a prolonged period of volatility.
Meanwhile, Managing Director of Financial Derivatives Company Limited, Bismarck Rewane, estimated the fair value of the naira at about N1,257 per dollar, suggesting the currency remains undervalued by approximately 11 per cent based on purchasing power parity analysis.
Rewane explained that exchange rates typically adjust towards their fair value over time, reinforcing expectations that the naira could strengthen further.
Nigeria’s foreign reserves have also recorded strong growth, rising by $5.82 billion to $46.11 billion as of January 28, 2026, compared to $40.29 billion in December 2024.
This marks the first time in about eight years that reserves have crossed the $46 billion mark, reflecting steady inflows and improved foreign exchange management.
Within January alone, reserves increased by about $510 million, rising from $45.5 billion at the end of 2025 to over $46 billion.
The steady buildup of reserves provides a stronger buffer for imports and supports exchange rate stability, while also reflecting improved confidence in the country’s economic management.
Foreign capital inflows have also risen significantly, reaching $20.98 billion in the first ten months of 2025. This represents a 70 per cent increase compared to total inflows in 2024 and more than four times the $3.9 billion recorded in 2023.
Central Bank Governor Olayemi Cardoso said the naira now trades within a more stable range, with the gap between the official and parallel markets narrowing to less than two per cent, compared to over 60 per cent previously.
He noted that Nigeria’s external sector strengthened considerably in 2025, with the current account surplus rising to $5.28 billion in the second quarter, while foreign reserves reached their highest level in nearly seven years.
Cardoso added that the improvement in reserves is largely driven by stronger export earnings, increased investor inflows, and improved foreign exchange market transparency, rather than borrowing.
Diaspora remittances also rose by about 12 per cent, supported by reforms aimed at improving efficiency and encouraging transfers through official channels.
Economic analysts attribute the improved outlook to several major policy reforms implemented by the government.
Economist and Chief Consultant at B. Adedipe Associates Limited, Prof. Abiodun Adedipe, said foreign exchange reforms have eliminated arbitrage opportunities and improved transparency.
He added that the removal of petrol subsidy has reduced fiscal pressure, while bank recapitalisation efforts are strengthening financial institutions and improving their capacity to support economic growth.
Other key reforms, including tax restructuring, credit support initiatives, and mortgage programmes, are also expected to drive long-term economic expansion.
Nigeria’s economic prospects are further supported by its large and youthful population, growing urbanisation, expanding internet penetration, and rising digital connectivity.
Local refining capacity is improving, manufacturing activity is gradually recovering, and interest in non-oil exports is increasing.
The Central Bank also emphasised the importance of coordination between fiscal and monetary policies, noting that the government has discontinued deficit financing through the apex bank as part of efforts to promote fiscal discipline and maintain macroeconomic stability.
Meanwhile, the Nigerian National Petroleum Company Limited reported strong financial performance, with revenue rising to N5.08 trillion in October 2025, compared to N4.27 trillion in September.
Profit after tax more than doubled to N447 billion, driven by improved operational efficiency and favourable market conditions.
Gas production and sales also increased significantly, although crude oil production recorded a slight decline to 1.58 million barrels per day.
Overall, analysts believe the combination of higher oil prices, stronger reserves, policy reforms, and increased investor confidence is positioning Nigeria’s economy for improved stability and growth, although sustaining the progress will depend on continued policy discipline and effective economic management.
Oil Price Rally, Rising Reserves Boost Naira Stability, Strengthen
