Nigeria could see a boost in its foreign exchange reserves and improved stability for the naira as rising global oil prices increase export earnings and foreign currency inflows.
Brent crude is currently trading above $93 per barrel, significantly higher than Nigeria’s 2026 budget benchmark of $64.85 per barrel. Analysts say the rally could strengthen government revenues and support the country’s external reserves.
Economists also warn that prices could climb even higher if geopolitical tensions escalate in the Middle East, particularly if the Strait of Hormuz, a critical maritime route that carries about 20 percent of the world’s oil supply, faces major disruptions.
“Higher oil prices typically strengthen Nigeria’s current account balance and improve foreign exchange liquidity,” said the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, in a policy brief titled Implications of the Iran–US–Israel Conflict on the Nigerian Economy.
“This could reduce short-term pressure on the naira and reinforce investor confidence,” Yusuf added.
Nigeria relies heavily on crude oil exports for foreign exchange earnings, with petroleum accounting for more than 90 percent of the country’s external revenue. As global oil prices climb, the country’s export receipts and fiscal position are expected to improve.
The naira has already shown signs of recovery in recent months, recently trading below N1,400 per dollar in the official market for the first time in over a year.
President of the Association of Bureau De Change Operators of Nigeria, Aminu Gwadabe, said the local currency has maintained relative stability across market segments following a prolonged period of volatility.
Financial analyst and Managing Director of Financial Derivatives Company, Bismarck Rewane, also believes the naira remains undervalued.
According to him, the currency’s fair value stands at about N1,257 to the dollar based on the purchasing power parity model, suggesting the naira is roughly 11 percent below its theoretical value.
He explained that exchange rates often move toward their purchasing power parity levels over five years, reinforcing the view that the naira may strengthen if economic conditions remain stable.
Nigeria’s external reserves have also recorded steady growth. The reserves reached $50.45 billion in February and are projected by the Central Bank of Nigeria to rise to about $51.04 billion in 2026.
In its macroeconomic outlook, the apex bank said stronger oil earnings, diaspora remittances, sovereign bond issuances, and ongoing reforms in the foreign exchange market will support the expected increase.
Cardoso noted that Nigeria’s net foreign exchange reserves stood at $34.80 billion as of December 2025, reflecting improved transparency and stronger reserve management.
“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,” he said.
Foreign capital inflows have also risen significantly. Total inflows reached $20.98 billion in the first ten months of 2025, a 70 percent increase from the previous year.
Analysts say the steady rise in reserves and improved currency stability suggest Nigeria’s economy may be better positioned to absorb external shocks, provided current reforms and fiscal discipline are sustained.
