Oil & Gas

The Central Bank of Nigeria (CBN) has ramped up efforts to strengthen foreign reserves, stabilize the naira, and boost dollar liquidity amid the ongoing rally in oil prices driven by heightened tensions between Israel and Iran. Brent oil futures climbed above $75 per barrel—surpassing Nigeria’s 2024 budget benchmark—offering an opportunity for the country to increase dollar earnings and shore up reserves. Analysts believe the CBN is strategically leveraging this price rally to reinforce macroeconomic gains, such as naira stability and improved foreign reserves. Escalating fears of supply disruptions in the Middle East, particularly around the Strait of Hormuz, have caused Brent and WTI crude prices to spike, with Goldman Sachs warning of further hikes if Iranian supply is impacted.

As oil prices surge, Nigeria’s economy stands to benefit significantly. The positive deviation from the government’s oil benchmark improves the country's revenue outlook, potentially helping to meet the N19.5 trillion oil revenue target for 2024. Additionally, the CBN’s structural reforms are paying off: GDP growth hit 3.4% in 2024, with the fourth quarter reaching 4.6%, inflation is cooling, and net reserves have risen fivefold. Governor Olayemi Cardoso has outlined further plans to expand the export base by promoting local production, simplifying diaspora remittances, and driving backward integration, especially in sectors like agriculture, manufacturing, and the creative industries, which he estimates could generate up to $25 billion annually.

The CBN is also encouraging the telecom sector to reduce its reliance on imports by producing SIM cards, towers, and cables locally. During a recent visit by Airtel Africa's leadership, Cardoso emphasized the need for backward integration to create jobs, reduce FX pressure, and stabilize the economy. Airtel expressed its support, citing long-term gains. Analysts argue that local production will lower import costs and protect profit margins if infrastructure challenges like power are addressed. The NCC reports growth in telecom subscribers, and analysts anticipate continued recovery as operators reactivate SIMs and expand internet access, especially under MTN and Airtel’s market leadership.

Improved FX reforms have also boosted investor confidence, with daily turnover in the Nigerian Autonomous Foreign Exchange Market increasing 226%, and reserves rising from $32 billion in May 2023 to over $40 billion—a near three-year high. The FX market has supported over $9 billion in capital repatriation, resolving historical delays in accessing forex. The country also recorded a $6 billion current account surplus in H1 2024, helped by reduced fuel imports, growing non-oil exports, and remittances. These outcomes affirm the effectiveness of CBN reforms and highlight the central role of oil revenue, FX management, and sectoral diversification in Nigeria’s economic revival.