…Experts push for stable output, clearer policies
By Chinwendu Obienyi
The naira traded steadily in the parallel foreign exchange market on Tuesday, exchanging at approximately between N1,608-N1,610 to the US dollar, as global oil markets rallied on the back of tightening supply and persistent geopolitical concerns.
This steadiness comes as Brent crude prices have experienced a sharp decline-falling more than 15 per cent month-on-month and over 20 per cent since April largely due to concerns about global economic growth and expectations that oil supply will outpace demand.
However, specifically at about 2:20 pm, Brent crude oil, Nigeria’s benchmark export, rose to $61.97 per barrel, gaining about +2.89 per cent.
The local currency’s relative firmness in the informal market reflects cautious optimism, bolstered by expectations that improved oil receipts could ease the country’s foreign exchange liquidity pressures in the near term.
This may be connected to the recent interventions by the Central Bank of Nigeria (CBN) and government efforts which have provided some support for the naira, helping it maintain key levels in both official and parallel markets.
The CBN’s interventions, including monetary tightening and liquidity management, have been credited with restoring some investor confidence and narrowing exchange rate volatility, although disparity still exists.
While these moves have reduced arbitrage opportunities, analysts caution that FX liquidity remains inadequate to meet genuine demand.
The latest surge in crude prices has been driven by a confluence of factors; technical corrections, dip buying and statement from OPEC+ that it remains committed to production discipline, thus easing bearish sentiment surrounding the naira. The oil rally offers a timely fiscal cushion for Nigeria, which relies on hydrocarbons for over 90 per cent of export revenues and more than half of government income.
Industry data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) indicates that crude oil production rose marginally in April, reaching an estimated 1.4 million barrels per day, excluding condensates. While still below Nigeria’s OPEC allocation of 1.74 million bpd, the marginal uptick provides scope for increased revenue generation if maintained.
Hence, economic experts are calling for urgent stabilization of oil output and more coherent, coordinated policy measures to ensure long-term currency and economic stability.
Nigeria’s ability to meet its oil production targets, which is critical for foreign exchange earnings, depends on resolving security and political challenges, especially in key oil-producing regions like Rivers State.
Founder, Cowry Asset Management Limited, Johnson Chukwu, stressed that the improved price environment creates short-term headroom for fiscal planners. Chwukwu, however, noted that the benefits would materialize only if the FG improves on its production volumes.
“The benefits will only materialize if production volumes rise consistently and if leakages including oil theft and refined product subsidies are curtailed”, he explained.
Head of Research at BlueEdge Capital, Amaka Okafor, noted that while sustained strength in oil prices offers welcome relief, Nigeria must address deeper vulnerabilities in its macroeconomic framework to stabilise the naira in the medium term.
Even with $90 per barrel, the exchange rate may not find equilibrium unless structural issues are addressed. We need productivity growth, credible FX management, and fiscal discipline, not just oil windfalls”, Okafor said.