Nigeria’s currency outlook is drawing renewed optimism from policymakers and market analysts, as a combination of stronger oil prices, rising foreign exchange inflows, and ongoing structural reforms continue to support the naira’s recovery across markets.
At the heart of the improved sentiment is the global oil market, where Brent crude has surged above $105 per barrel which is above Nigeria’s 2026 budget benchmark of $64.85.
The rally, driven largely by geopolitical tensions in the Middle East, is widely seen as a major tailwind for Africa’s largest oil producer, with direct implications for fiscal revenues, foreign exchange reserves, and currency stability.
Analysts say the possibility of an escalation in tensions involving the United States and Iran could push oil prices even higher, particularly if supply routes such as the Strait of Hormuz through which roughly 20 per cent of global oil flows pass are disrupted.
In a worst-case scenario, some projections suggest oil prices could spike to as high as $150 per barrel.
For Nigeria, such a development presents a mixed fortune. With over 80 per cent of export earnings tied to crude oil, higher prices translate almost immediately into improved dollar inflows, stronger external reserves, and enhanced capacity for the Central Bank of Nigeria to stabilise the naira.
Recent market data already reflects this trend. The naira has strengthened both at the official and parallel markets, with the local currency trading around N1,385 to the dollar in the parallel segment, while also breaching the N1,400/$1 threshold at the official window for the first time in over a year.
Analysts describe this as a key psychological milestone that signals improving confidence in Nigeria’s foreign exchange framework.
Figures from the Central Bank of Nigeria showed that the Nigerian Foreign Exchange Market rate appreciated to N1,396.99/$1, up from N1,400.48/$1 a day earlier, reinforcing the narrative of gradual but consistent strengthening.
External reserves are also trending upward, further bolstering the currency outlook. Nigeria’s reserves stood at approximately $48.44 billion as of late April, with projections pointing toward a year-end target of about $51 billion. At current levels, the reserves provide more than 12 months of import cover, a significant buffer against external shocks and a key indicator of macroeconomic resilience.
Market participants attribute much of this progress to the policy direction of the Central Bank of Nigeria (CBN) under Governor Olayemi Cardoso.
Since assuming office, Cardoso has spearheaded a series of reforms aimed at restoring transparency, improving liquidity, and attracting foreign investment into Nigeria’s foreign exchange market.
These reforms include the liberalisation and unification of exchange rates, the clearance of a multi-billion-dollar FX backlog, and a decisive shift away from direct central bank financing of fiscal deficits. Together, these measures have helped reduce distortions in the market and narrow the gap between the official and parallel exchange rates to less than two per cent—down from over 60 per cent in previous years.
“The most important point is that our FX reserves are being rebuilt organically,” he noted at a recent policy forum. “This is not about short-term fixes, but about creating a system that can sustain stability over the long term.”
Supporting this view is the performance of Nigeria’s external sector. The country recorded a sharp improvement in its current account balance, which rose by over 85 per cent to $5.28 billion in the second quarter of 2025, up from $2.85 billion in the preceding quarter. This surge reflects stronger export earnings and improved inflows from remittances and foreign investment.
Diaspora remittances, in particular, have shown renewed momentum, increasing by about 12 per cent as confidence returns to official channels.
The introduction of initiatives such as the Non-Resident Bank Verification Number (BVN) is expected to further enhance inflows in 2026, providing a steady source of foreign exchange to complement oil revenues.
Beyond oil, there are also encouraging signs from the non-oil export segment, which has grown by more than 18 per cent year-on-year.
President of the Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe, noted that the naira has exhibited unusual stability in recent months, marking a departure from years of volatility.
Similarly, Managing Director of Financial Derivatives Company, Bismarck Rewane, believes the naira remains fundamentally undervalued. Using the purchasing power parity (PPP) model, Rewane estimates the fair value of the currency at approximately N1,257 to the dollar, suggesting an undervaluation of about 11 per cent.
He argued that currencies tend to gravitate toward their PPP-implied values over time, typically within a five-year horizon, indicating that the naira could strengthen further if current trends persist.
This view is echoed by global economist and author Charlie Robertson, who observed that a weaker dollar environment globally is benefiting emerging markets, including Nigeria. “A weak dollar is dislocating many markets, but it is good for Africa, as we are seeing with the naira,” he said.
Beyond market dynamics, structural reforms across fiscal and monetary policy are also playing a critical role in shaping investor confidence. Economic analyst Abiodun Adedipe highlighted several policy shifts that are beginning to yield tangible results.
These include the removal of fuel subsidies, which has eliminated an estimated $10.7 billion in annual fiscal burden, and ongoing bank recapitalisation efforts aimed at building stronger financial institutions capable of supporting a $1 trillion economy. In addition, improved fiscal discipline, enhanced revenue collection mechanisms, and the deployment of technology to plug leakages are expanding Nigeria’s fiscal space.
Adedipe also pointed to broader structural drivers supporting the economy, including Nigeria’s large and youthful population, rapid urbanisation, and growing digital penetration. With over 120 million internet users and increasing mobile connectivity, the country is well positioned to harness digital growth and expand its non-oil sectors.
Infrastructure improvements and the expansion of domestic refining capacity are expected to further reduce reliance on imports and improve the balance of payments over time.
Crucially, there is increasing alignment between fiscal and monetary authorities, which analysts say is essential for sustaining macroeconomic stability.
…Oil prices climb to $114
Meanwhile, oil prices have climbed further yesterday with Brent Crude selling at $114.0 per barrel, up by over five per cent against yesterday’s price.
Daily Trust reports that the U.S. has launched “Project Freedom,” deploying significant military assets to escort stranded vessels through the Strait of Hormuz.
Iran has issued a direct warning that any U.S. forces entering the strait will be attacked, asserting control over its security.
Oil prices climbed following Iran’s warning after dropping earlier in the day on hopes of a de-escalation.
The Iranian Armed Forces on Monday warned the U.S. it would attack forces that intend to approach or enter the Strait of Hormuz, after U.S. President Donald Trump launched ‘Project Freedom’ to help escort vessels stranded in the Gulf out of the Middle East.
President Trump on Sunday announced that “Project Freedom” would begin on Monday morning, Middle Eastern time.
The project will involve the U.S. guiding stranded vessels out of the Strait of Hormuz. President Trump emphasized that the stranded ships would be from “areas of the world that are not in any way involved” with the conflict in the Middle East.
Oil prices were under pressure following Trump’s original announcement, but then started to climb after Iran made clear that it would attack any forces that approached the Strait. At the time of writing, Brent had climbed 1.52% to trade at $109.80, while WTI was up 1.56% at 103.50.
“The U.S. Central Command (CENTCOM) forces will begin supporting Project Freedom, May 4, to restore freedom of navigation for commercial shipping through the Strait of Hormuz,” the command said shortly after President Trump announced the launch of Project Freedom.
“Our support for this defensive mission is essential to regional security and the global economy as we also maintain the naval blockade,” said Adm. Brad Cooper, CENTCOM commander.
…Expert backs new BVN policy
Meanwhile, the Executive Secretary/CEO of the National Cooperative Financing Agency of Nigeria, Emmanuel Atama, has thrown his weight behind the new Bank Verification Number (BVN) policy introduced by the Central Bank of Nigeria, describing it as a necessary step to strengthen financial security, even as concerns persist over its impact on financial inclusion.
Speaking on a Trust TV business programme, Atama said the tighter BVN framework which is designed to curb rising cases of SIM swap fraud, identity theft and unauthorised access to bank accounts, was “commendable” and long overdue in Nigeria’s evolving digital financial ecosystem.
Atama argued that without such measures, the financial system would remain vulnerable to abuse.
“I’m wondering what would happen in the financial ecosystem if BVN is not there,” he said. “We must commend the CBN and stakeholders for bringing up policies that will help checkmate fraud and wrongdoing.”
Under the new rules, customers can only operate their banking apps on one device at a time, while switching devices triggers additional verification and transaction limits.
Similarly, phone numbers linked to BVN can now be changed only once in a lifetime—a move specifically targeted at curbing SIM swap fraud, a major vulnerability in Nigeria’s banking system.
Banks are also empowered to place suspicious accounts on a 24-hour watch list, temporarily restricting transactions while verification is carried out.
While acknowledging that these measures may introduce short-term inconvenience, Atama insisted that the long-term benefits outweigh the challenges.
“People move from one phone to another frequently, and that creates loopholes. This policy is designed to close those gaps,” he said.
Atama, however, dismissed the notion that the informal sector is technologically disadvantaged.
“If you go to markets and garages, you’ll see that many people in the informal sector use smartphones actively watching videos, using apps and engaging online,” he said.
He emphasised that the real challenge lies not in access to technology, but in awareness and education.
DAILY TRUST.
