Nigeria’s economic outlook has received a fresh boost as rising global oil prices strengthen the naira and push external reserves to multi-year highs, reinforcing reforms introduced by the Central Bank of Nigeria (CBN).

Brent crude is currently trading around $69 per barrel — above Nigeria’s 2026 budget benchmark of $64.8 — a development analysts say will significantly bolster government revenues, foreign exchange inflows and exchange rate stability.

Oil Prices Climb on Geopolitical Tensions

Global oil prices extended gains for a third consecutive day amid fears of potential military escalation between the United States and Iran, raising concerns about possible supply disruptions in the Middle East.

Brent crude futures rose 1.4 per cent to $69.34 per barrel, while U.S. West Texas Intermediate (WTI) gained 1.5 per cent to $64.13. Analysts warn that a full-scale disruption of the Strait of Hormuz — a strategic chokepoint for about 20 per cent of global oil flows — could push prices as high as $91 or even $150 per barrel in extreme scenarios.

For Nigeria, where oil accounts for more than 80 per cent of export earnings, the rally provides critical fiscal relief and strengthens macroeconomic buffers.

Naira Breaks Key N1,400/$ Threshold

In a significant milestone, the naira traded below N1,400/$1 at the official market for the first time in over a year.

Data from the CBN show the Nigerian Foreign Exchange Market (NFEM) rate strengthened to N1,396.99/$1, improving from N1,400.48/$1 the previous day. The currency had earlier weakened to N1,422.07/$1 in January before gradually recovering.

At the parallel market, the naira also appreciated to N1,454/$, according to Cowry Asset Management Limited, reflecting improved investor sentiment across both formal and informal segments.

President of the Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe, noted that the naira has remained relatively stable in recent months, marking a departure from years of volatility.

Meanwhile, Managing Director of Financial Derivatives Company, Bismarck Rewane, estimated the naira’s fair value at about N1,257/$ based on purchasing power parity, suggesting the currency remains undervalued by roughly 11 per cent.

External Reserves Hit Eight-Year High

Nigeria’s external reserves have surged past $46 billion for the first time in nearly eight years, rising by $5.82 billion to $46.11 billion as of late January 2026, according to CBN data.

The reserve build-up reflects stronger oil receipts, rising capital inflows and improved foreign exchange management. Analysts say the increase enhances Nigeria’s import cover and strengthens its resilience to external shocks.

CBN Governor Olayemi Cardoso attributed the gains to structural reforms, improved market transparency and narrowing spreads between official and parallel market rates.

He noted that the gap between the two markets has shrunk to under two per cent, down from over 60 per cent at its peak.

“Our FX reserves are being rebuilt organically — not by borrowing — but through improved market functioning, stronger non-oil exports and robust capital inflows,” Cardoso said.

Capital Inflows Surge 70%

Foreign capital inflows reached $20.98 billion in the first 10 months of 2025 — a 70 per cent increase compared to total inflows in 2024 and a 428 per cent jump from 2023 levels — underscoring renewed investor confidence.

Diaspora remittances also rose by approximately 12 per cent, supported by enhanced transparency and settlement efficiency in official channels.

Policy Reforms Driving Stability

Economic analysts credit key reforms — including exchange rate unification, subsidy removal, fiscal consolidation and bank recapitalisation — for strengthening Nigeria’s macroeconomic fundamentals.

The CBN has reiterated its commitment to ending deficit financing and deepening coordination with fiscal authorities to ensure durable price stability under a future inflation-targeting framework.

NNPC Revenue Jumps

Data from the Nigerian National Petroleum Company Limited (NNPC Ltd) show revenue climbed to N5.08 trillion in October 2025, up from N4.27 trillion in September, while profit after tax surged to N447 billion.

Although crude production dipped slightly to 1.58 million barrels per day, gas output and sales recorded strong growth, further supporting external earnings.

Outlook: Cautious Optimism

Analysts say the oil rally, combined with structural reforms and rising reserves, positions Nigeria for improved exchange rate stability in the near term.

However, they caution that sustaining the momentum — particularly in an election year — will depend on continued fiscal discipline, policy consistency and diversification beyond oil revenues.

For now, the combination of higher oil prices, stronger capital inflows and improved governance signals a brighter outlook for the naira and Nigeria’s external reserves.