How CBN-led FX Reforms Support Economic Growth, Non-oil Export Expansion

The ongoing drop oil-prices is being cushioned by the Central Bank of Nigeria (CBN)-led FX reforms as seen in the flexible foreign exchange (FX) regime, rising non-oil exports, and growing services trade. The CBN deployment of the Electronic Forex Market Surveillance System, shift to a single, market-determined exchange rate regime, and enhanced risk-based banking are expanding Nigeria’s capacity to earn more income outside oil, and support macroeconomic stability. Precious Ugwuzor reports

Nigeria’s economic diversification project is gaining ground. Oil is now accounting for a smaller share of the Gross Domestic Product (GDP), 33 per cent of government revenue, and 51 per cent of exports.

Findings show that after nearly a decade in which real Gross Domestic Product (GDP) growth averaged about two per cent, economic reforms embarked by the Central Bank of Nigeria (CBN) have restored momentum and confidence in Nigeria’s broad macroeconomic environment.

Already, the economy grew by 4.23 per cent in the second quarter of 2025, the strongest pace in four years, driven by improvements in telecommunications, financial services, and oil production.

The introduction of the Nigerian Foreign Exchange Code has established clear rules for transparency, ethics, governance, and fair dealing among authorised dealers. The deployment of the Electronic Foreign Exchange Management System (EFEMS) system, powered by Bloomberg BMatch, has equally transformed FX trading through mandatory order submission, real‑time regulatory visibility, and enhanced price discovery.

Together, these reforms have reduced opacity and manipulation, and restored discipline to the market. The naira now trades within a narrow, stable range. The once‑substantial gap between the official and parallel markets has shrunk to under two per cent, down from over 60 per cent.

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.

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.

Flexible exchange rate to be sustained

The CBN boss said the apex bank is committed to maintaining the current flexible exchange‑rate framework that allows the naira to act as a shock absorber while limiting excessive volatility.

“To strengthen this framework further, we will shortly be unveiling the revised FX Manual to expand market participation and tighten documentation standards, enhance EFEMS surveillance, and ensure consistent implementation to avoid any possibility of policy reversal. Recent assessments by rating agencies have provided significant external validation of Nigeria’s reform trajectory,” he said.

Already, Fitch, Moody’s, and Standard & Poor’s have all acknowledged the positive impact of Nigeria’s reforms, from stronger reserves to improved fiscal discipline and greater FX transparency. Across all three agencies, the direction is consistent: fundamentals are strengthening, reform credibility is rising, and Nigeria’s risk profile is improving.

Fitch upgraded Nigeria from B- to B (stable), recognising our commitment to orthodox policies including FX reform, monetary tightening, and ending deficit monetisation. Moody’s also raised its rating from Caa1 to B3 in May, citing improved fundamentals and a stronger outlook. And just this November, S&P affirmed B-/B and revised its outlook to positive, underscoring sustained reform momentum, rising reserves, and enhanced macroeconomic resilience.

Moody’s has also further concluded its periodic review and while headlines may highlight risks, as rating agencies are mandated to do, the substance of the report reaffirms ongoing improvements, including stronger fiscal metrics and deeper diversification.

“These endorsements of Nigeria’s policy direction have translated directly into improved borrowing terms, increased investment inflows, and enhanced credibility. Underscoring this progress, Nigeria this month successfully raised US$2.35 billion through a Eurobond issuance, attracting US$13 billion in orders, the largest in the nation’s history,” he said.

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 11th and 7th 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.

Buffers against oil prices fall

Managing Director, Financial Derivatives Company Limited, Bismarck Rewane, said global oil prices have dropped significantly, now hovering just above $63 per barrel while the naira exchanges at N1,445/$ at the official window.

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 CBN has proactively initiated strong measures aimed at cushioning the domestic economy against the looming oil price shock and ensuring sustainable economic development.

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 per cent of Gross Domestic Product (GDP), potentially fueling inflationary pressures and weakening macroeconomic stability.

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.