Nigeria’s foreign exchange reserves have declined significantly in the first four months of 2025, dropping from $40.88bn in January to $38.47bn in May, largely due to falling global crude oil prices. Oil, which provides over 90% of Nigeria’s forex earnings, saw prices drop from $73.29 to $62.78 per barrel as OPEC+ members increased production. Projections suggest prices could fall further, threatening Nigeria’s revenue targets and increasing the fiscal deficit to 6–7% of GDP, heightening inflationary risks.
In response to dwindling reserves and a weakening naira, the Central Bank of Nigeria (CBN) has launched reforms aimed at boosting local production and reducing dependence on imports. These include encouraging backward integration in key sectors like agriculture, manufacturing, and creative industries. The CBN also simplified dollar remittance processes and drew from China’s model to promote an export-driven economy using Nigeria’s competitive exchange rate.
The CBN Governor, Olayemi Cardoso, is urging the telecom sector to embrace local production of inputs like SIM cards and cables, aiming to reduce import reliance and preserve forex. Airtel Africa has expressed support, acknowledging long-term benefits of local sourcing. Analysts believe such moves will strengthen the naira, reduce production costs, and spur growth in both telecom and banking sectors that rely heavily on digital infrastructure.
Reforms under Cardoso’s leadership have begun restoring investor confidence. The Nigerian Autonomous Foreign Exchange Market saw a 226% rise in daily turnover, while foreign portfolio inflows grew by 72%. Additionally, remittance inflows doubled, aided by new diaspora-focused financial products like Non-Resident Nigerian Ordinary and Investment Accounts. These efforts aim to attract diaspora capital, improve liquidity, and stabilize the forex market.
Analysts forecast further growth in remittances and investor participation due to improved confidence in Nigeria’s economic direction. The CBN’s strategies—ranging from enhanced local production to streamlined diaspora engagement—are intended to bolster forex earnings and ensure long-term macroeconomic stability. According to experts, remittances and non-oil exports are emerging as critical tools to reduce Nigeria’s vulnerability to oil shocks and sustain inclusive economic growth.