Copyright tribuneonlineng
As global oil prices tumble toward the $60-per-barrel range, the mood in oil-dependent economies has shifted from cautious optimism to strategic anxiety. For Nigeria, whose fiscal lifeline still leans heavily on crude exports, the sharp fall in prices, hovering just above $64 per barrel, poses a renewed threat to revenue stability, foreign exchange inflows, and overall macroeconomic health, writes JOSEPH INOKOTONG. The global oil market is once again testing the resilience of oil-dependent economies. With Brent crude prices now hovering slightly above $64 per barrel and analysts warning of a possible dip below $50 before the end of 2025, concern is mounting in Nigeria, where the government’s 2025 budget still banks on $75 per barrel and daily production of two million barrels. For the Olayemi Cardoso-led Central Bank of Nigeria (CBN), this is not a time for complacency. It is a call to action. In a global environment defined by fragile demand, shifting trade dynamics, and tightening monetary conditions, the CBN has begun reinforcing Nigeria’s economic buffers and building the foundations for sustainable foreign exchange inflows. The bank’s strategy is deliberate: reduce dependence on oil, strengthen non-oil exports, restore market confidence, and create an economy that can withstand external shocks. The fiscal implications of falling crude prices are already evident. At current price levels, oil revenues would fall well below projections, leaving a potential fiscal gap of six to seven percent of GDP. Such a shortfall would amplify inflationary pressures, stretch public finances, and undermine efforts to stabilise the naira. Yet, the CBN appears determined to stay ahead of the curve through proactive policy steps designed to attract investments and diversify foreign exchange sources. At the core of Cardoso’s policy drive is a renewed focus on Nigeria’s non-oil export capacity. Drawing lessons from economies like China and Vietnam, the bank is encouraging an export-led growth model anchored on competitive exchange rates, value addition, and local productivity. Businesses are being urged to tap global markets through agricultural exports, light manufacturing, creative content, and digital trade. Cardoso estimates that Nigeria’s creative sector alone could generate up to $25 billion annually if its vast potential is systematically harnessed through international licensing, streaming platforms, and cross-border collaborations. The CBN’s push for backward integration underscores this broader vision. During a recent meeting with Airtel Africa executives in Abuja, Cardoso emphasized the need for telecom operators to manufacture key components such as SIM cards, cables, and towers locally rather than relying on imports that drain scarce foreign exchange. “Boosting local production is crucial to easing pressure on the dollar, generating employment, and strengthening the economy,” he said. The message is clear: the era of import dependence must give way to domestic production and innovation. Airtel’s Group CEO, Sunil Taldar, responded positively, commending the CBN’s policy direction and affirming the company’s support for local sourcing. Analysts also view the shift as a logical step in addressing Nigeria’s persistent FX pressures. Charles Abuede, Research Head at Cowry Asset Management, described the move as timely. “The high dollar demand from telecom operators has contributed to naira weakness. By producing more components locally, these companies can significantly reduce FX exposure and operating costs—if the business environment remains stable,” he said. Beyond specific sectors, the CBN’s macroeconomic management has been undergoing quiet but significant transformation. Since assuming office, Cardoso and his team have pursued reforms that restore transparency and credibility to the foreign exchange market. The Bank has cleared outstanding FX backlogs, unified exchange rates, and tightened liquidity to curb speculation. At the IMF/World Bank Annual Meetings in Washington DC, the Governor told investors that these reforms have begun to yield results, reflected in improved market confidence, steady capital inflows, and stronger reserve positions. Nigeria’s external reserves have risen to $43.4 billion, their highest in five years, offering an 11-month import cover that cushions the economy against external shocks. Inflation, while still elevated, is projected to ease toward 18 percent, and growth is forecast at about four percent, driven largely by expansion in non-oil sectors. Cardoso insists that the combination of disciplined policy, prudent fiscal coordination, and a competitive naira will sustain this momentum. “We are building not just short-term stability, but a more durable and resilient economy,” he said. Deputy Governor for Economic Policy, Mohammed Sadi Abdullahi, has also underscored the impact of the Bank’s market reforms. He revealed that capital inflows, which had collapsed by over 75 percent between 2019 and 2020, have rebounded, improving Nigeria’s external liquidity. Average monthly turnover in the FX market now exceeds $8.6 billion, up from about $5.5 billion previously, a sign that liquidity is returning and confidence is deepening. “Today, the CBN is a net buyer in the market, not a net supplier,” Abdullahi said, calling it a reflection of improved market efficiency and reduced speculative activity. Cardoso’s message to investors has been one of cautious optimism. He told participants at the Washington forum that Nigeria’s economy is undergoing a “complete restructuring,” shifting away from an import-heavy consumption model to a production-oriented one. The result, he noted, is a positive trade balance, now estimated at around six percent of GDP, and a more competitive naira that has become an incentive rather than a deterrent for investment inflows. This new policy direction is particularly significant given global uncertainties. OPEC may soon raise production quotas, potentially pushing oil prices even lower. Meanwhile, the world’s two largest oil consumers, China and India, continue to recalibrate their energy sourcing strategies amid geopolitical tensions. In this unpredictable environment, Nigeria’s success will depend not on the vagaries of oil prices but on its capacity to sustain reform momentum, diversify exports, and maintain macroeconomic discipline. At the heart of this shift is a growing belief within the CBN that Nigeria’s economic stability must rest on productive capacity, not price cycles. The bank’s renewed engagement with key sectors—telecoms, manufacturing, agriculture, and creative industries—reflects a broader effort to integrate domestic industries into global value chains. By discouraging imports, promoting local production, and enabling export competitiveness, the CBN aims to gradually reduce external vulnerabilities while building internal strength. For Cardoso, the path ahead requires continued discipline and patience. “The difficult decisions were necessary. But because we made them early, we are now able to create resilience and buffers against potential shocks,” he said recently. That assertion captures the underlying philosophy of the CBN’s current approach: reform first, stability later, growth thereafter. Global economic conditions remain fragile. Yet, Nigeria’s macroeconomic indicators are slowly turning in the right direction, backed by growing investor confidence and rising non-oil inflows. The road to diversification is long and complex, but the direction is unmistakable. By building stronger buffers today, the Central Bank is positioning Nigeria’s economy for a more stable, competitive, and self-sustaining future, one less vulnerable to the unpredictable tides of oil. For Cardoso and his team, the message is consistent: build an economy that can stand firm even when oil falters. Through a combination of monetary prudence, structural reform, and strategic engagement with the private sector, the CBN is charting a course toward sustainable growth and financial stability. The journey is far from over, but the direction is unmistakably forward. As oil markets flirt with volatility and the world’s economic balance shifts, Nigeria’s ability to navigate these waters will depend on its capacity to adapt. Under Cardoso’s leadership, the Central Bank is betting on resilience, transforming short-term challenges into long-term opportunities, and turning falling oil prices into a catalyst for real economic renewal.
