CBN Reforms: How Oil Price Rally is Opening Windows for Naira, Reserves Rebound

As Brent crude trades around $69 per barrel, comfortably above Nigeria’s 2026 budget benchmark of $64.85, there is cautious optimism that the gains could filter through to the naira Nigerians use every day. Analysts warn that any disruption to the Strait of Hormuz, which handles about 20 per cent of global oil supply, could push prices sharply higher, to $91 or even $150 per barrel within weeks. Coming at a time when the naira and external reserves have begun to stabilise following foreign exchange reforms introduced by the Olayemi Cardoso-led Central Bank of Nigeria, the oil price rally is being closely watched as a potential turning point for the currency and the country’s reserves. Precious Ugwuzor reports 

Oil prices rose last week, sustaining gains as concerns grew that the United States could still take military action against Iran, a key Middle Eastern oil producer, potentially disrupting regional supplies.

Brent crude futures rose by 94 cents, or 1.4 per cent, to $69.34 a barrel, US West Texas Intermediate (WTI) crude also jumped 1.5 per cent to $64.13 per barrel.

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.

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 maintained its steady momentum against the dollar during the first week of this month.

Despite a slight intraday adjustment, the local currency demonstrated resilience in the official window, underpinned by consistent CBN interventions and a transparent electronic trading framework.

In the Nigerian Foreign Exchange Market (NFEM), the naira opened the session on Friday, February 6, with a strong showing at N1,367.10 per dollar.

As trading progressed through the morning, the rate experienced minor fluctuations, hitting a mid-morning average of N1,366.53.

This performance indicates a level of stability that has characterized the currency’s movement throughout the week. Financial data from the CBN shows that the official rate has consistently held its ground below the 1,400 mark since the beginning of February.

Analysts attribute this stability to a combination of factors, including a moderating inflation rate of 15.15 per cent and a steady Monetary Policy Rate (MPR) of 27 per cent, which have collectively bolstered investor confidence and dampened speculative demand.

The parallel market, remains relatively steady with a narrow spread compared to the official sector. In major commercial hubs like Lagos and Abuja, Bureau De Change operators are quoting the dollar between N1,445 and N1,460.

While the “black market” continues to trade at a premium over the NFEM rate, the gap has remained notably narrow for much of the week.

Traders report that the absence of aggressive hoarding and a steady supply of dollars for personal travel and small business needs have prevented any major spikes. This stability suggests that the CBN’s efforts to channel more demand into the official window are yielding positive results.

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.

Reserves also upbeat

Nigeria’s external reserves have also continued to rise, increasing by $5.82 billion or 14.45 percent to $46.9 billion as of February  5, 2026, from $40.29 billion recorded on December 2, 2024, according to data on the CBN website.

Nigeria’s external reserves crossed the $46 billion mark for the first time in about eight years, highlighting the steady growth the reserve has been recording since 2025.

According to the latest data from the Central Bank of Nigeria (CBN), the country’s external reserve has increased by about $510 million in 22 days, moving from $45.502 billion on December 31, 2025, to $46.012 billion on January 22, 2026.

Other industry data shows that Nigeria’s external reserves were last at this level on August 27, 2018, when it stood at $45.9 billion.

The reserve build-up signals stronger buffers for import cover and currency stability, reflecting steady inflows and improved foreign exchange management since the forex reforms began, as the country prepares for a general election.

The CBN data also suggests a notable turnaround from the volatility experienced during the early phase of the new forex regime, with the reserves closing at about $45.5 billion in 2025, having opened the year at roughly $40.8 billion.

Analysts have expressed optimism that the steady growth of Nigeria’s external reserve for several months will be sustained this year.

They said that the various reforms by the government have brought stability and confidence, thereby causing improvement in the country’s external reserves.

They, however, noted that while the reserves can be sustained in the short term, sustaining the momentum throughout the election year will depend on discipline on the part of the government.

Foreign capital inflows rise

Foreign capital inflows reached US$20.98 billion in the first 10 months of 2025, a 70 per cent increase over total inflows for 2024 and a 428 per cent surge compared to the US$3.9 billion recorded in 2023, reflecting a clear resurgence in investor confidence.

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 US$5.28 billion in Q2, up from US$2.85 billion in Q1. Bolstering our external buffers, foreign reserves reached US$46.7 billion 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.

Major policy shifts lifting economy

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 US$10.7 billion and created environment for competition; bank recapitalisation is creating stronger and more capable banks to fund US$1 trillion 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.

Support for domestic economy

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% 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 11^th and 7^th 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.

Fiscal‑monetary coordination

The CBN explained that monetary reform cannot be effective in a vacuum.Alignment with fiscal policy has strengthened Nigeria’s macro stability andyielded 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.

“This stance is unequivocal as there will be no return to the practice of financing fiscal deficits by the Central Bank. In parallel, the fiscal authorities have embarked on key institutional reforms – including the implementation of a Revenue Optimisation (RevOp) framework, the establishment of a new National Revenue Agency, and upgrades to the Treasury Single Account (TSA) – to strengthen revenue mobilisation and public financial management,” Cardoso said.

“As we transition towards a full‑fledged inflation‑targeting framework, this partnership will deepen, ensuring fiscal and monetary policies reinforce each other in delivering durable price stability,” he added.

Oil/gas output, revenue position

The Nigerian National Petroleum Company Limited (NNPC Ltd) reported a significant surge in revenue, hitting N5.08 trillion in October 2025, up from N4.27 trillion recorded in September. The figures are contained in the company’s Monthly Report Summary for October 2025.

According to the report, NNPC Ltd’s profit after tax (PAT) rose sharply to N447 billion in October, compared to N216 billion in September, stronger operational efficiency, improved market conditions, and enhanced cost optimisation strategies deployed by the national oil company.

The report shows that production hit 6,997 million standard cubic feet per day (mmscf/d) in October, up from 6,284 mmscf/d in September.

Gas sales, reported on an M-2 basis, climbed to 4,713 mmscf/d, marking a significant increase from 3,443 mmscf/d recorded in the previous month.

Crude oil production experienced a slight dip, falling to 1.58 million barrels of oil per day (mmbopd) in October from 1.61 mmbopd in September.

NNPC Ltd also stated that it will continue to sustain industry-wide collaboration and drive production recovery initiatives.

Foreign capital inflows rise

Foreign capital inflows reached US$20.98 billion in the first 10 months of 2025, a 70 per cent increase over total inflows for 2024 and a 428 per cent surge compared to the US$3.9 billion recorded in 2023, reflecting a clear resurgence in investor confidence.

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 US$5.28 billion in Q2, up from US$2.85 billion in Q1. Bolstering our external buffers, foreign reserves reached US$46.7 billion 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 US$10.7 billion and created environment for competition; bank recapitalisation is creating stronger and more capable banks to fund US$1 trillion 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.