Increased Oil Production Key to Tackling Inflation and FX Volatility, Says Agusto & Co.
Agusto & Co., a Pan-African credit rating agency, has stressed the importance of increased crude oil production in addressing Nigeria’s inflation and foreign exchange (FX) market volatility. During a recent Economic Roundtable in Lagos, Jimi Ogbobine, Head of Agusto Consulting, argued that boosting oil production would provide Nigeria with the necessary revenue to stabilize the naira, regardless of inflationary pressures. He highlighted that a focus on oil output could ensure economic stability by strengthening the nation’s foreign exchange reserves.
The event, held in honor of Agusto & Co.’s late founder, Olabode Agusto, aimed to provide insights into Nigeria’s economic future. It explored various sectors, including banking, finance, energy, and agriculture, with a focus on policy reforms and investment opportunities. The discussions included the key uncertainties facing Nigeria’s economy in 2025, such as debt sustainability, oil performance, and inflation management.
Ogbobine pointed out that Nigeria’s foreign exchange challenges could be mitigated through higher oil production, emphasizing that the country’s oil revenue depends not only on crude prices but also on the quantity sold. He also addressed structural issues contributing to inflation, particularly in food security, and urged the government to maintain efforts to avoid the return of fuel subsidies.
Recent data from the Nigerian Upstream Petroleum Regulatory Commission showed a significant increase in Nigeria’s oil production in January 2025, reaching its highest output in three years. This rise in output, surpassing the country’s OPEC quota, signals potential economic benefits if sustained, particularly in reducing foreign exchange challenges and supporting the national budget.
Concerns over Nigeria’s fiscal deficit and debt sustainability were also discussed. Ogbobine raised alarms about the government’s high spending, particularly under the current administration, and noted that Nigeria’s fiscal deficit had surpassed the recommended limit of 3% of GDP. Despite these concerns, Agusto & Co. Managing Director Yinka Adelekan underscored the importance of continued dialogue and policy reforms, including exchange rate unification and subsidy removal, to strengthen Nigeria’s economic foundation and ensure sustainable growth.
SOURCE: PUNCH