Signs of Recovery? Naira Begins to Stabilize as Oil Production Rises

By Achimi Muktar

After weeks of turbulence, the Nigerian naira is showing signs of stabilization in the unofficial foreign exchange market, appreciating slightly from USD/NGN 1,150 to USD/NGN 1,145 over the past week. This modest gain has brought cautious optimism among traders and policymakers alike.

The improvement comes amid a slight rebound in Nigeria’s oil production, which increased by 1.47 million barrels in October, reaching 41.867 million barrels compared to 40.396 million in September. However, the country still fell short of its OPEC quota by approximately 12 million barrels—a gap with significant implications for the nation’s dollar reserves.

OIL PRODUCTION: THE LIFEBLOOD OF THE NAIRA

With crude oil accounting for about 90% of Nigeria’s foreign exchange earnings, any production shortfall directly affects the Central Bank of Nigeria’s (CBN) ability to stabilize the naira. Despite the recent uptick, experts warn that missing production targets could continue to hamper efforts to strengthen the currency.

The link between oil production and the naira's performance remains crucial. As global oil markets face uncertainties, Nigeria’s ability to sustain and even exceed its production targets will play a decisive role in boosting foreign exchange inflows.

CBN’S ROLE IN THE FX MARKET

The stabilization of the naira also reflects ongoing efforts by the CBN to clear the backlog of foreign exchange demands at the official market. The bank’s interventions, aimed at restoring confidence in the economy, have helped to temper volatility, but challenges remain.

Market sentiments indicate that stakeholders are closely watching the CBN’s next moves, particularly regarding policy measures to support businesses and attract foreign investment.

WHAT’S NEXT FOR THE NAIRA?

While the naira’s slight rebound offers a glimmer of hope, analysts caution that sustained recovery will require more than oil production gains. Structural reforms, improved revenue generation, and effective monetary policies will be critical in the months ahead.

For now, the naira’s stabilization hints at progress—but for many Nigerians, the road to lasting financial recovery is far from over.