How FX reforms open new opportunities for growth, non-oil exports

Nigeria’s economy is showing renewed resilience and optimism. CHIMA NWOKOJI in this report examines how the the Central Bank of Nigeria (CBN) continues to implement a series of strategic foreign exchange (FX) reforms aimed at bolstering non-oil exports, diversifying revenue streams, and strengthening macroeconomic stability.

Nigeria’ s ongoing economic reforms and diversification efforts are being significantly supported by a flexible FX regime, a rise in non-oil exports, and growing services trade, which together are cushioning the impact of declining global oil prices.

The CBN has introduced critical reforms, including the deployment of the Electronic Forex Market Surveillance System (EFEMS), the transition to a single, market-determined exchange rate, and enhanced risk-based banking. These interventions are expanding Nigeria’s capacity to earn foreign exchange outside the oil sector, while supporting sustainable economic growth.

Nigeria’s diversification agenda is showing tangible progress. Oil, which historically dominated the economy, now accounts for a smaller proportion of the Gross Domestic Product (GDP), representing 33 percent of government revenue and 51 per cent of total exports. This shift indicates a gradual but deliberate move toward a more balanced economic structure.

After nearly a decade in which real GDP growth averaged about two percent, the reforms initiated by the CBN have rekindled economic momentum. The economy expanded by 4.23 percent in the second quarter of 2025, marking the strongest growth pace in four years. Key contributors include improvements in telecommunications, financial services, and modest increases in oil production, demonstrating that Nigeria’s economy is increasingly driven by non-oil sectors.

Strengthening the FX market

The introduction of the Nigerian Foreign Exchange Code has provided clear guidelines for transparency, ethics, governance, and fair dealing among authorised dealers. EFEMS, powered by Bloomberg BMatch, has revolutionized FX trading by requiring mandatory order submission, enabling real-time regulatory oversight, and improving price discovery.

These reforms have curtailed market opacity and manipulation, restored discipline, and enhanced investor confidence. The naira now trades within a narrow and stable range, and the gap between official and parallel market rates has narrowed dramatically from over 60 percent to under two percent.

Foreign capital inflows have mirrored this confidence. In the first 10 months of 2025, Nigeria attracted US$20.98 billion in foreign capital—a 70 percent increase over total inflows in 2024 and a 428 per cent surge from US$3.9 billion in 2023.

CBN governor, Olayemi Cardoso, emphasised that these developments reflect Nigeria’s enhanced resilience to external shocks. “Macroeconomic indicators show that Nigeria is more resilient today than at any point in our recent history,” he said.

Nigeria’s external sector strengthened decisively in 2025. The current account balance increased by over 85 per cent to US$5.28 billion in the second quarter, up from US$2.85 billion in Q1. Bolstering external buffers further, foreign reserves reached US$46.7 billion by mid-November, the highest level in nearly seven years. This provides more than 10 months of forward import cover, significantly enhancing the economy’s resilience to shocks.

Governor Cardoso highlighted that these reserves were built organically—through improved market functioning, stronger non-oil exports, and robust capital inflows—rather than through borrowing. “This is a critical step toward sustainable economic stability,” he said.

Non-oil exports are showing remarkable growth, up more than 18 percent year-on-year, driven by exchange rate flexibility and market reforms. Diaspora remittances have also increased by roughly 12 percent, supported by improved transparency, settlement efficiency, and the adoption of the Non-Resident BVN, which is expected to boost remittance flows further in 2026.

Commitment to a flexible exchange rate

Cardoso reaffirmed the CBN’s commitment to maintaining a flexible exchange rate regime that allows the naira to absorb external shocks while limiting excessive volatility. Plans are underway to unveil a revised FX Manual to expand market participation, tighten documentation standards, enhance EFEMS surveillance, and ensure consistent implementation of FX policies.

International rating agencies have validated Nigeria’s reform trajectory. Fitch upgraded the country from B- to B (stable), citing adherence to orthodox policies, FX reform, monetary tightening, and the end of deficit monetisation. Moody’s upgraded Nigeria from Caa1 to B3, while Standard & Poor’s affirmed B-/B with a positive outlook, recognising sustained reform momentum, rising reserves, and enhanced macroeconomic resilience.

“These endorsements have improved borrowing terms, attracted increased investment inflows, and strengthened Nigeria’s credibility,” Cardoso said. The recent US$2.35 billion Eurobond issuance, which attracted US$13 billion in orders—the largest in Nigeria’s history—underscores the global confidence in the economy.

Professor ‘Abiodun Adedipe, founder and Chief Consultant of B. Adedipe Associates Limited, identified major policy shifts contributing to the economic upswing. He highlighted CBN’s elimination of arbitraging and round-tripping opportunities in the forex market, the removal of petrol subsidies saving US$10.7 billion annually, bank recapitalisation, and fiscal consolidation. These measures have strengthened financial institutions, increased competition, and expanded fiscal space at sub-national levels.

Adedipe emphasised that tax reforms could spark regional economic competition, akin to the Chinese model, while institutions like the Nigerian Education Loan Fund, Consumer Credit Corporation, recapitalised Bank of Agriculture, and the National Credit Guarantee Company Ltd. are key to sustaining growth. Additionally, access to single-digit interest rate mortgage loans would support long-term economic development.

Nigeria’s economy benefits from a large and youthful population, estimated at 237.53 million in July 2025, with a median age of 18.1 years. Rapid urbanization—54.28 per cent in 2023, up from 46.12 per cent in 2013—combined with increasing internet penetration at 48.15 percent, and a tele-density of 79.65 percent, provide a strong foundation for growth. Nigeria ranks 11th globally in total internet users, with over 84 percent on mobile devices.

Domestic oil refining is expanding, manufacturing is reviving, and non-oil export prospects are improving. Infrastructure upgrades are expected to reduce the cost of doing business, while sustained reforms will enhance global competitiveness, attract investment, and plug systemic leakages.

Fiscal-monetary coordination

Monetary reforms are reinforced by alignment with fiscal policy, improving liquidity, reducing domestic borrowing costs, and promoting fiscal discipline. Discontinuation of direct deficit financing demonstrates a commitment to financial stability, while fiscal authorities have implemented institutional reforms including the Revenue Optimization (RevOp) framework, establishment of a new National Revenue Agency, and upgrades to the Treasury Single Account (TSA).

Cardoso stated: “As we transition toward a full-fledged inflation-targeting framework, fiscal and monetary policies will reinforce each other to deliver durable price stability.”

The Nigerian National Petroleum Company Limited (NNPC Ltd) reported strong revenue growth, hitting N5.08 trillion in October 2025, up from N4.27 trillion in September. Profit after tax rose to N447 billion in October from N216 billion in September, reflecting operational efficiency, improved market conditions, and cost optimization.

Gas sales increased significantly to 4,713 million standard cubic feet per day (mmscf/d), up from 3,443 mmscf/d in September. Crude oil production, however, dipped slightly to 1.58 million barrels per day from 1.61 million barrels, reflecting the sector’s operational dynamics. NNPC Ltd affirmed continued collaboration and initiatives to sustain production recovery.

Global oil prices have fallen, currently hovering around $63 per barrel, below the 2025 budget benchmark of $75 per barrel. This gap could push Nigeria’s fiscal deficit to between six and seven percent of GDP, potentially fueling inflation and weakening macroeconomic stability.

Financial experts, including Bismarck Rewane of Financial Derivatives Company Limited, emphasise the importance of policy measures to cushion the economy against oil price shocks. These include strengthening non-oil exports, boosting domestic production to reduce import dependence, and streamlining diaspora remittance channels.

Harnessing export-led growth

The CBN has underscored the potential of a competitive exchange rate to drive export-led growth, drawing inspiration from China’s economic strategy. Businesses are encouraged to adopt export-oriented approaches in agriculture, manufacturing, and creative industries, implement import-substitution models to reduce reliance on imports, and focus on value addition to increase foreign exchange earnings.

These strategies are critical in ensuring that Nigeria maximizes revenue from non-oil sources, diversifies its economy, and builds resilience against external shocks. By fostering a robust export culture, the country can achieve sustainable growth while reducing vulnerability to oil price fluctuations.

Nigeria’s FX reforms and macroeconomic policies are producing significant results, creating an environment that supports growth, investment, and fiscal discipline. Non-oil exports are rising, foreign reserves are at multi-year highs, and investor confidence is returning, reflected in record capital inflows and successful Eurobond issuances.

The CBN’s commitment to a flexible exchange rate, fiscal-monetary coordination, and structural reforms is creating a resilient economic foundation. With continued focus on diversification, export-led growth, and domestic industrialization, Nigeria is poised to reduce dependence on oil, strengthen its external buffers, and achieve sustainable development in the coming years.

In sum, the combined effect of FX market reforms, fiscal discipline, export promotion, and strategic infrastructure investments is positioning Nigeria for a new era of economic stability, competitiveness, and inclusive growth. The challenge ahead lies in sustaining momentum, deepening reforms, and translating macroeconomic gains into tangible improvements in living standards for Nigerians nationwide.