CBN Reforms Shield Naira as Oil Prices Crash Below Budget Benchmark

With global crude oil prices plunging to around $64 per barrel—well below Nigeria’s $75 per barrel budget benchmark—the country faces renewed fiscal and foreign exchange pressures. However, the Central Bank of Nigeria (CBN) has implemented sweeping reforms to stabilise the naira, rebuild reserves, and boost non-oil inflows, helping to cushion the economy from oil market shocks.

Nigeria’s dependence on crude oil revenue has left its 2025 budget exposed, as weaker oil prices and lower production levels threaten to widen the fiscal deficit and strain the exchange rate. Data from the Nigerian Upstream Petroleum Regulatory Commission show that daily output has averaged 1.5–1.8 million barrels, below the two million barrels per day benchmark. Analysts warn that this could push the fiscal deficit to nearly 7 per cent of GDP, heightening inflation and currency risks.

In response, the CBN, under Governor Olayemi Cardoso, has introduced strategic measures to diversify Nigeria’s FX sources, rebuild reserves, and strengthen non-oil exports. The apex bank’s reforms focus on boosting diaspora remittances, promoting value-added exports, tightening import controls, and driving backward integration across key sectors.

Figures from the CBN show that external reserves rose from $38.9bn in April to $43.4bn by October 2025, the highest level in six years—providing about 11 months of import cover. The FX market has also recorded improved liquidity, with monthly turnover rising to $8.6bn from $5.5bn last year.

Meanwhile, non-oil exports climbed by 19.6 per cent in the first half of 2025 to $3.23bn, driven by strong demand for cocoa, urea, and cashew, according to the Nigerian Export Promotion Council. The CBN also identified the creative sector and telecommunications as key drivers of foreign exchange diversification, encouraging local production of inputs to reduce import dependence.

The results of these reforms are beginning to show. The naira appreciated to N1,421.73/$ at the end of October 2025—the strongest level so far this year—supported by steady FX inflows and growing investor confidence. The balance of payments also turned positive, recording a $6.83bn surplus in 2024, driven by improved trade balances and higher remittances.

Governor Cardoso noted that Nigeria is undergoing a “complete restructuring of the economy,” with stronger non-oil performance, a positive trade balance, and inflation easing to around 18 per cent. He added that reforms have created resilience against global headwinds, positioning the country for sustainable growth.

Still, economists caution that maintaining these gains will require fiscal discipline and structural reforms. With oil prices likely to remain below budget projections, Nigeria may need to expand non-oil revenue and reduce low-impact spending to prevent renewed inflation and currency pressure.

Despite global uncertainties, analysts say the CBN’s policies—centered on economic diversification, transparency, and policy discipline—are gradually reshaping Nigeria’s FX landscape and reducing the country’s vulnerability to oil market volatility.