Elevated oil prices are reshaping Nigeria’s economic outlook, as Brent crude trades above $105 per barrel—significantly higher than the 2026 budget benchmark of $64.85. With risks to the Strait of Hormuz threatening up to 20 per cent of global supply, analysts project a potential surge to $150, a development that could materially strengthen FX inflows, reserves, and naira stability.
With Brent crude trading above $105 per barrel—higher than Nigeria’s 2026 federal budget benchmark of $64.85—the price rally would largely bolster the country’s fiscal revenues, foreign exchange reserves and promote naira stability. Analysts posit that a full-scale conflict disrupting the Strait of Hormuz—a chokepoint for about 20 per cent of global oil flows could send Brent prices surging to even $150 per barrel. The development presents opportunity for higher FX inflows for Nigeria, and a brighter future for the naira.
Oil prices rose above $105 per barrel, extending gains for months as concerns grew that the United States could sustain hostilities against Iran—a key Middle Eastern oil producer—potentially disrupting regional supplies.
The oil prices rally is driven mainly by geopolitical risk premium surrounding Iran and the Middle East, though unplanned outages in Kazakhstan and U.S. (Winter Storm Fern) has had a temporary impact as well.
The naira and foreign reserves are bound to benefit from the development. The key reforms instituted by the Olayemi Cardoso-led Central Bank of Nigeria (CBN), have also increased possibility for the local currency and external reserves to benefit from the oil windfall.
Rising threats of US–Iran military action have led analysts to project that oil prices may remain high amid heightened geopolitical risks, US restrictions on Russian oil purchases, and sustained Chinese demand, even as markets entered the year expecting a large oversupply
For Nigeria, oil prices increase comes with significant gains in. terms of revenue, and economy stability given that over 80 per cent of the country income are from petrodollars.
Already, the naira has traded below the N1,400/$1 level on the official market for the first time in over a year, marking a notable psychological and market milestone for the currency.
Data from the Central Bank of Nigeria show that the Nigerian Foreign Exchange Market rate, the determining benchmark for the official market, strengthened to N1,396.99/$1 on Thursday, up from N1,400.48/$1 on Wednesday. This move confirms the naira’s return below N1,400/$1 after an extended period of trading above that level.
Also, Nigeria’s foreign-exchange reserves are on track to climb toward $51bn this year, underscoring a steady recovery in external buffers even as global shocks and domestic political risks test the durability of recent reforms.
At $48.44bn as of April 23, the country’s reserves cover more than 12 months of imports, according to analyst estimates, reinforcing the Central Bank of Nigeria’s (CBN) view that its year-end target of $51.04bn remains achievable despite headwinds from the Middle East crisis.
President, Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe, said the naira has remained stable across market for several months, ending years of volatility in the market.
Additionally, Managing Director of Financial Derivatives Company (FDC), Bismarck Rewane, estimated the fair value of the naira at about N1,257 to the US dollar.
Rewane posits that the local currency is undervalued by approximately 11 per cent when assessed using the purchasing power parity (PPP) model.
Rewane made the submission during his keynote address at the 2026 Economic Outlook organised by the Association of Corporate Treasurers of Nigeria (ACTN), where he anchored the session and offered a detailed analysis of the structural and cyclical factors influencing Nigeria’s exchange-rate movements.
He noted that currencies typically converge towards their PPP-implied values over a five-year horizon.
According to him, the appropriate exchange rate based on current PPP estimates stands at N1,256.79 to the dollar, reinforcing the view that the naira remains below its fair valuation level.
A weak dollar is dislocating many markets, but it is good for Africa, as we are seeing with the naira,” Charlie Robertson, author of The Time Travelling Economist, said.
The rally in the naira also reflects rising confidence in Nigeria’s macroeconomic direction, supported by stronger foreign exchange inflows, rising external reserves and improved market governance.
The Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso explained that naira now trades within a narrow, stable range. The huge gap between the official and parallel markets has shrunk to under two per cent, from over 60 per cent.
For him, macroeconomic indicators show that Nigeria is more resilient to external shocks today than at any point in our recent history.
For instance, Nigeria’s external sector strengthened decisively in 2025, with the current account balance rising over 85 per cent to $5.28bn in Q2, up from $2.85bn in Q1. Bolstering our external buffers, foreign reserves reached $46.7bn by mid-November, the highest in nearly seven years, providing over 10 months of forward import cover and significantly enhancing the economy’s resilience.
Cardoso explained that what is most important here is that our FX reserves are being rebuilt organically, not by borrowing, but through improved market functioning, stronger non-oil exports, and robust capital inflows.
“While oil production improved modestly to an average of 1.45–1.52 million barrels per day in 2025, the truly encouraging development is the strong performance of non-oil exports. Supported by ongoing reforms and greater exchange-rate flexibility, non-oil exports have grown by more than 18 per cent year-on-year, reflecting rising competitiveness under a truly market-driven FX framework,” he said.
He disclosed that as with foreign investor inflows, diaspora remittances have also strengthened with confidence returning to official channels following enhancements in transparency, settlement efficiency, and reporting. Remittances increased by approximately 12 per cent this year, and we expect this momentum to continue as the Non-Resident BVN, launched earlier this year, becomes more widely adopted in 2026.
Prof. ‘Abiodun Adedipe, founder and Chief Consultant of B. Adedipe Associates Limited (BAA Consult), listed major policy shifts yielding positive results for the economy. He said that the CBN has eliminated strange arbitraging and roundtripping opportunity through the forex market reforms; through petrol subsidy removal, the Federal Government Remove crippling annual waste of $10.7bn and created environment for competition; bank recapitalisation is creating stronger and more capable banks to fund $1tn economy while fiscal consolidation is plugging leakages, deploying technology and making government agencies more accountable and expanding fiscal space at sub-national.
Continuing, Adedipe said the real game changer remains the tax reforms, capable of igniting regional competition (the secret behind Chinese economic renaissance) while the Nigerian Education Loan Fund, Consumer Credit Corporation, Recapitalized Bank of Agriculture, National Credit Guarantee Company Ltd, Single digit interest rate mortgage loans are major steps that should be taken to support sustainable economic growth.
Adedipe said that Nigeria’s economy is supported by large, youthful and rapidly growing population (estimated at 237.53 million in July 2025 and sixth largest in the world, median age at 18.1 years).
The country, he said, also benefits from rapid urbanization with 54.28 per cent in December 2023, up from 46.12 per cent in 2013 and 51.96 per cent in 2020, deepening internet penetration which is at 48.15 per cent in April 2025, up from 45.57 per cent in August 2023 and 31.48 per cent in December 2018.
Nigeria’s tele-density at 79.65 per cent in May 2025, from 76.08 per cent in December 2024 and 102.97 per cent in Dec 2023, due to data cleanup at end of April 2024.
“On global internet users, shows that Nigeria with 123 million ranks 11th and 7th with over 84 per cent on mobile devices. Local oil refining continues to expand and prospects of new refineries, manufacturing is reviving and there is expanding interest in non-oil exports. Improvement in infrastructure will begin to positively impact the cost of doing business,” he said.
He added that sustained deep reforms will enhance global competitiveness and Ease of Doing Business, plug leakages and shrink the space for economic rent.
The CBN explained that monetary reform cannot be effective in a vacuum. Alignment with fiscal policy has strengthened Nigeria’s macro stability and yielded tangible results including reduced domestic borrowing costs, improved liquidity conditions, and more predictable fiscal operations.
For instance, the discontinuation of direct deficit financing signals one prong in our commitment to discipline.
