There are indications that ongoing economic reforms may gain traction over rising foreign exchange inflow, FELIX OLOYEDE reports
The country’s external revenues increased by 18.69 per cent to $38.33bn as of June 4, 2025, up from $32.29bn as of April 15, 2024, reflecting a renewed interest in Nigeria’s economy.
The economy attracted foreign portfolio investments totalling $3.48bn in the six months following reforms, compared to $756.1m before the Central Bank of Nigeria initiated its recent economic reforms.
Although when the apex bank commenced economic reforms in June 2023 with the unification of the country’s foreign exchange market, the economy suffered, causing the exchange rate to rise to nearly N2,000/$1 and fueling hardships across the country.
The external reserves fell by 3.77 per cent to $33.70bn on 24 June 2024, down from $35.02bn on 30 May, as investors adopted a wait-and-see approach, awaiting the policy direction of the new government.
With a reviewed policy direction, investor confidence appears to be growing.
Nigeria’s economic managers have been implementing measures aimed at boosting foreign capital inflows. Notably, some policies by the CBN, have led to a significant uptick in foreign capital inflows while reducing the need for direct intervention in the forex market.
The clearance of a $7bn foreign exchange backlog have further improved investor sentiment. Some of the reforms have been lauded by international stakeholders, including the World Bank, which described them as bold steps toward enhancing the country’s long-term economic sustainability.
CBN Governor Olayemi Cardoso noted that, upon assuming office, his administration prioritised rebuilding Nigeria’s economic buffers and strengthening overall financial resilience.
Inflation, which had soared to 27 per cent, emerged as one of the nation’s most pressing challenges, largely fueled by excessive money supply growth. While GDP growth remained stagnant at a meagre 1.8 per cent over the previous eight years, money supply expanded at a rapid pace, averaging 13 per cent annual growth.
This imbalance not only drove inflation higher but also led to a significant depreciation of the naira. He noted that inflation breeds uncertainty for both households and businesses, acting as a silent tax by eroding purchasing power and escalating living costs.
The country was also grappling with a severe fiscal crisis, exacerbated by unsustainable deficit financing through the Central Bank’s Ways and Means advances, which had ballooned to an unprecedented N22.7tn by 2023—equivalent to nearly 11 per cent of GDP. Additionally, quasi-fiscal interventions by the CBN, totalling over N10tn, further eroded market confidence and diminished the effectiveness of its policy tools
Against these odds, the CBN’s current macroeconomic stabilisation efforts support Nigeria’s ability to attract foreign investors to its markets.
At the end of 2024, Nigeria leveraged its improved economic fundamentals to re-enter the Eurobond market, seeking to address its fiscal deficit. The move marked the country’s return to the international debt market in November after a two-year absence. In a dual-tranche Eurobond issuance, investor demand surged, with subscriptions exceeding $9bn.
Despite the strong interest, the government chose to raise $2.2bn. The issuance included $700m in 6.5-year bonds set to mature in 2031, carrying a 9.625 per cent coupon rate, and $1.5bn in 10-year bonds with a coupon rate of 10.375 per cent.
The high-interest rate environment has contributed to a surge in foreign portfolio investment, which reached $3.48bn in the first half of 2024—up sharply from $756.1m during the same period in 2023. This trend reflects growing investor confidence in Nigeria’s capacity to manage its external debt obligations, sending a positive signal to Eurobond markets.
Despite persistent inflationary pressures—evident in the December inflation rate of 34.80 per cent—the CBN has responded with aggressive monetary tightening. In 2024 alone, the Monetary Policy Rate was raised by a cumulative 875 basis points to 27.50 per cent, aimed at anchoring inflation expectations and restoring macroeconomic stability.
The elevated policy rate, which is likely to remain in place through 2025 (with the possibility of modest rate cuts in the first half of the year), could further attract foreign portfolio investors to Nigeria’s high-yielding fixed-income market. While inflation remains a concern—driven by fuel subsidy removal and exchange rate realignment—the broader outlook points to a potential gradual improvement in price stability.
Cardoso explained during the last Banker’s Night in Lagos.
He said, “I want to assure you that at the Central Bank, every decision we make is driven by a commitment to serving the best interests of the people. This is why we will continue strengthening our internal capacity and processes to ensure our decisions remain firmly rooted in evidence-based analysis.”
The Head of Investment Research and Global Macro Strategist at Commercio Partners, Ifeanyi Ubah, stated that the government will continue to fulfil its obligations through a combination of multilateral loans, syndicated facilities, and possible new Eurobond issuances.
In a report titled “Nigeria’s Eurobond Outlook: Resilience Amid Global Uncertainty,” he explained that the performance of the country’s Eurobond in 2025 would depend on a fragile balance between improvements within the country and global monetary conditions.
“The country’s strengthening foreign reserves, improving fiscal revenues, and progress in structural reforms provide a robust foundation for managing its external debt. However, global headwinds, particularly a potentially hawkish Federal Reserve amid rising U.S. inflation, could weigh on market sentiment,” he said.
Ubah noted that if the Federal Reserve continues to uphold restrictive interest rates, investor appetite for emerging market assets—particularly Nigeria’s Eurobonds—could diminish, driving yields higher.
However, he emphasised that sustained reform momentum and prudent management of external liquidity risks may help mitigate these pressures, keeping Nigeria’s Eurobonds a comparatively attractive investment within the Sub-Saharan Africa region.
For now, he described the outlook as cautiously optimistic, hinging on a balance between domestic policy coherence and evolving global economic conditions.
“While there are uncertainties over the size of net reserves—owing to FX swaps with local banks—Nigeria’s gross reserves provide an estimated nine months of imports, well above the median for peers in the ‘B’ rating category. The country’s ongoing security challenges, particularly in oil-producing regions, could undermine efforts to boost crude production, which could average 1.4mn barrels per day in 2025—still below pre-pandemic levels,” Ubah enunciated.
Global oil prices have declined sharply, with Brent crude now trading just above $60 per barrel. For an oil-dependent economy like Nigeria, this downward trend presents a significant challenge. The Wall Street Journal’s projection that Brent could fall below $50 per barrel by the end of 2025 adds to the uncertainty, underscoring the urgent need for strategic policy responses.
At $50 per barrel and a production volume of 1.5 million barrels per day, Nigeria’s oil revenues would fall approximately 10 per cent short of the fiscal breakeven point. Such a scenario could widen the fiscal deficit to as much as 6–7 per cent of GDP, potentially fueling further inflationary pressures.
In anticipation of these risks, the CBN has implemented countermeasures aimed at insulating the domestic economy from the adverse effects of a potential oil price shock.
The apex bank has said it is taking measures to improve Nigeria’s export potential, promoting backwards integration principles to reduce the import of items that can be produced locally and simplifying dollar remittances to the domestic economy for Nigerians in diaspora.
Drawing inspiration from China’s economic success, the CBN asserted that a competitive exchange rate was pivotal for driving Nigeria’s export-led growth.
To capitalise on this, the bank advised businesses to adopt export-oriented strategies, focusing on high-potential sectors like agriculture, manufacturing, and creative industries. This includes implementing import-substitution models by bolstering domestic production and reducing reliance on expensive imports, and prioritising value addition by processing raw materials rather than exporting them.
Cardoso highlighted the creative sector’s potential to generate $25bn annually, urging businesses to leverage international markets, digital platforms, and global tours to boost foreign exchange earnings.
He also recently encouraged telecom companies to reduce import dependency by localising key component production.”
The backwards integration proposal for the telecom industry comes at a time when the real sector is in dire need of sustainable growth. The CBN boss gave insights on what the economy stands to gain from backwards integration in the telecoms sector.
During a visit from Airtel Africa’s management team, led by Group CEO Sunil Taldar, Cardoso spoke in Abuja, emphasising the economic benefits of local production. He stated that domestic manufacturing of key telecom inputs like SIM cards, cables, and towers, currently imported, would alleviate pressure on the dollar, create jobs, and stimulate Nigeria’s economy.
Cardoso noted the CBN’s efforts over the past 16 months to stabilise the foreign exchange market, strengthen the Naira, and attract investors. Consequently, he urged telecom firms to adopt backwards integration strategies.
In response, Airtel Africa’s CEO, Sunil Taldar, commended the CBN’s reforms and pledged support for local production, recognising its long-term advantages for telecom companies. Taldar also reiterated Airtel’s commitment to advancing financial inclusion through technology.
Analysts anticipate continued naira stability, citing renewed FPI interest, fuelled by improved market confidence, a more efficient forex framework, strengthening macroeconomic conditions, and the CBN’s sustained market interventions.
While headline inflation eased slightly—from 24.23 per cent in March to 23.71 per cent in April—the decline remains too modest to warrant monetary loosening. This is particularly significant given that foreign portfolio inflows remain highly sensitive to interest rate differentials
Cardoso said, “We recognise that inflation remains the most disruptive force to the economic welfare of Nigerians. Our policy stance is firmly focused on bringing inflation down to single digits in a sustainable manner over the medium term. Our goal is to restore price stability, protect household purchasing power, and lay the foundation for long-term investment.”
Analysts note Nigeria’s ambitious target of seven per cent economic growth, aiming for substantial poverty reduction and significant improvements in Nigerians’ lives.
While the World Bank projects a 3.6 per cent growth for Nigeria’s economy this year, its lead economist for Nigeria, Alex Sienaert, lauded the government’s macroeconomic reforms for stabilising the economy.
However, Sienaert emphasised the need for more inclusive growth, particularly through expanded cash transfer programs for vulnerable populations.
He further stressed that international experience indicates the public sector alone cannot generate sustainable economic growth and jobs due to limited public resources.
Sienaert concluded that Nigeria’s successful strategy lies in positioning the public sector to both deliver essential services—like human capital development and infrastructure—and foster an enabling environment for private sector prosperity.
“Nigeria is no exception, particularly since public resources remain constrained. A useful strategy is to position the public sector to play a dual role as a provider of essential public services, especially to build human capital and infrastructure, and as an enabler for the private sector to invest, innovate, and grow the economy,” Sienaert added.
The World Bank stated that Nigeria’s economy must grow five times faster than its current rate to reach the $1tn target by 2030 and to tackle the increasing poverty levels in the country.
