CBN: Building Buffers To Protect Economy, Boost FX Amid Oil Price Fall

Global oil prices have dropped significantly, now hovering just above $64 per barrel. For an oil-dependent economy like Nigeria, this continued decline in crude prices presents a serious concern rather than a relief. The Wall Street Journal’s grim forecast that Brent crude could fall below $50 per barrel by the end of 2025 only deepens the urgency for strategic policy responses. To strengthen economic buffers and sustain FX inflows, the Olayemi Cardoso-led Central Bank of Nigeria (CBN) has proactively initiated strong measures aimed at cushioning the domestic economy against the looming oil price shock and ensuring sustainable economic development.

The politics and talks around global oil prices always ignite significant worry on Nigeria and her revenues.

Already, brent futures eased by 0.71 per cent to $64.47pb as U.S.-China trade truce excluded energy discussions, keeping the supply outlook uncertain.

Nigeria’s 2025 budget is squeezed by assumption of oil production of two million barrels per day and an oil price of $75 a barrel.

At a benchmark of $75 per barrel and a production capacity of two million barrels per day (mbpd), Nigeria’s oil revenues would fall given the present oil price which is below budget benchmark. Such a shortfall could push the fiscal deficit to between six and seven percent of Gross Domestic Product (GDP), potentially fueling inflationary pressures and weakening macroeconomic stability.

However, the CBN under the leadership of Olayemi Cardoso, has proactively initiated measures aimed at cushioning the domestic economy against the looming oil price shock.

Among these are policies to boost Nigeria’s non-oil export potential, strengthen backward integration to reduce dependence on imported goods, and streamline diaspora dollar remittances to enhance foreign exchange inflows.

Drawing from China’s economic strategy, the apex bank said Nigeria’s competitive exchange rate can drive export-led growth.

To harness this potential, businesses are expected to adopt export-oriented strategies by targeting sectors with strong export potential such as agriculture, manufacturing and creative industries; implement import-substitution models by strengthening domestic production capabilities and reducing reliance on costly imports; and focus on value addition by shifting from exporting raw materials to processed goods, thereby boosting foreign exchange earnings.

Cardoso said Nigeria’s creative sector has potential to attract $25 billion annually to the economy, highlighting the untapped opportunities in Nigeria’s expanding creative sector, including music, film, crafts and digital exports. He urged businesses to explore international markets, digital platforms, and global tours to increase dollar revenue inflows.

The CBN boss also recently advised telecom companies to reduce their dependence on foreign imports by producing key components of their inputs locally. The backward integration proposal for the telecom industry comes at a time the real sector is in dire need of sustainable growth. The CBN boss gave insights on what the economy stands to gain from backward integration in the telecoms sector