Nigeria's Economic Indicators Show Positive Momentum as Oil Prices Surge
In a significant development for Nigeria's fiscal landscape, Brent crude oil prices have risen above the country's 2026 budget benchmark, coupled with notable gains in the naira's value and external reserves. This triple boost signals a strengthening economic position amid global market fluctuations.
Oil Prices Exceed Budget Expectations Amid Geopolitical Tensions
On Thursday, Brent crude futures climbed to $69.34 per barrel, surpassing Nigeria's budget benchmark of $64.8 per barrel. This represents a 1.4% increase, with US West Texas Intermediate (WTI) also rising by 1.5% to $64.13. The rally, extending gains for a third consecutive day, is driven by concerns over potential military action by the United States against Iran, which could disrupt oil supplies from the Middle East.
Market analysts warn that a full-scale conflict affecting the Strait of Hormuz, a critical route for approximately 20% of global oil flows, could push Brent prices to as high as $91 or even $150 per barrel within weeks. This price increase comes as Nigeria continues to benefit from foreign exchange market reforms introduced by Central Bank of Nigeria (CBN) Governor Olayemi Cardoso.
Naira Appreciates Below Key Threshold for First Time in Over a Year
Data from the CBN reveals that the Nigerian naira appreciated to N1,396.99/$1 at the official Nigerian Foreign Exchange Market (NFEM), marking the first time in over a year that it has traded below the N1,400/$1 threshold. This improvement follows a period of weakness, with the currency having traded as low as N1,422.07/$1 in late January before gradually strengthening.
At the parallel market, the naira also gained, appreciating by 1.06% to N1,454/$, reflecting improved sentiment across both official and informal segments. Aminu Gwadabe, President of the Association of Bureaux De Change Operators of Nigeria (ABCON), noted that the naira has remained relatively stable in recent months, ending years of volatility.
Bismarck Rewane, Managing Director of Financial Derivatives Company, estimated the fair value of the naira at about N1,257/$ based on purchasing power parity (PPP), suggesting the currency is currently undervalued by roughly 11%. He highlighted that exchange rates typically converge towards PPP-implied levels over a five-year period.
External Reserves Reach Highest Level in Eight Years
Nigeria's external reserves have surged to over $46 billion, the highest level in approximately eight years. CBN data shows reserves increased by $5.82 billion, or 14.45%, to $46.11 billion as of January 28, 2026, up from $40.29 billion in December 2024. Within the first 22 days of January alone, reserves rose by about $510 million.
Analysts indicate that this reserve build-up strengthens Nigeria's import cover and enhances currency stability, particularly as the country approaches a general election year. However, they caution that sustaining this momentum will depend on continued fiscal discipline and policy consistency.
Foreign Inflows and Reforms Support Economic Outlook
Foreign capital inflows reached $20.98 billion in the first 10 months of 2025, representing a 70% increase over total inflows for 2024 and a 428% jump compared to 2023. Governor Cardoso reported that the gap between official and parallel exchange rates has narrowed to under 2% from more than 60% previously, with the naira now trading within a relatively stable band.
He added that Nigeria's current account surplus rose by over 85% to $5.28 billion in the second quarter of 2025, supported by improved non-oil exports and stronger foreign exchange management. Reserves are being rebuilt through improved market functioning, capital inflows, and non-oil export growth rather than borrowing.
In 2025, oil production averaged between 1.45 and 1.52 million barrels per day, while non-oil exports grew by more than 18% year-on-year. Diaspora remittances also increased by about 12%, aided by reforms such as the Non-Resident BVN initiative.
Policy Reforms and Sector Performance Drive Stability
Prof. 'Abiodun Adedipe, founder of B. Adedipe Associates Limited, highlighted several policy shifts contributing to improved economic stability, including petrol subsidy removal, foreign exchange market reforms, bank recapitalisation, and fiscal consolidation. He emphasized tax reforms, consumer credit expansion, agricultural financing, and mortgage initiatives as measures capable of sustaining long-term growth.
In the oil and gas sector, the Nigerian National Petroleum Company Limited (NNPC Ltd) reported revenue of N5.08 trillion in October 2025, up from N4.27 trillion in September. Profit after tax rose to N447 billion from N216 billion over the same period. Gas production increased to 6,997 million standard cubic feet per day in October, while gas sales climbed to 4,713 mmscf/d. Crude oil production, however, dipped slightly to 1.58 million barrels per day from 1.61 million barrels per day in September.
Despite these positive trends, Bureau de Change (BDC) operators have raised concerns, noting they have yet to access the official foreign exchange window announced by the CBN. The apex bank's policy allows licensed BDCs to purchase up to $150,000 weekly, but many operators report the directive remains largely unimplemented, citing multiple administrative hurdles.
