With global crude oil prices dipping below expectations, the Central Bank of Nigeria (CBN) has intensified efforts to diversify the country’s foreign exchange (FX) sources by promoting non-oil exports and local production.
As international oil markets face instability, with Brent crude edging just above $60 per barrel and projections suggesting a potential slide below $50 by year-end, Nigeria’s oil-dependent economy is feeling the pressure. At $50 per barrel and a daily production rate of 1.5 million barrels, the country’s oil earnings would fall short of its fiscal break-even, possibly pushing the deficit to over 6% of GDP.
In response, CBN Governor Olayemi Cardoso has launched a comprehensive push toward non-oil revenue generation, focusing on expanding Nigeria’s export base and reducing dependency on imports. These strategies include promoting backward integration, simplifying diaspora remittances, and encouraging value addition in key industries.
Reinforcing Non-Oil Export Channels
Cardoso emphasized the importance of leveraging Nigeria’s competitive exchange rate to stimulate export-led growth. He identified agriculture, manufacturing, and the creative sector as prime areas for boosting FX inflows. According to him, the creative industry alone could contribute up to $25 billion annually, with sub-sectors like music, film, digital content, and crafts holding significant untapped potential.
He urged local entrepreneurs and businesses to tap into international markets, explore global distribution platforms, and organize export-focused campaigns to maximize their earnings in foreign currency.
Support for Local Manufacturing and Telecom Sector
The apex bank is also urging businesses, especially in the telecommunications industry, to reduce reliance on imported components. During a meeting with Airtel Africa’s top executives, Cardoso advocated for domestic production of items like SIM cards, cables, and transmission towers.
“Boosting local manufacturing not only eases pressure on FX demand but also creates jobs and strengthens the economy,” Cardoso stated. Airtel Africa’s CEO, Sunil Taldar, welcomed the initiative, pledging support for local sourcing and expanded investment in financial inclusion technologies.
Telecom industry data from the Nigerian Communications Commission shows a steady increase in both voice and internet subscriptions, indicating recovery after SIM reactivation drives. Analysts expect continued growth, especially from leading operators like MTN and Airtel.
Improved Investor Confidence and Diaspora Engagement
The CBN’s ongoing reforms have significantly improved investor sentiment, with daily turnover in the Nigerian Autonomous Foreign Exchange Market rising by over 200% year-on-year. Foreign portfolio inflows have increased by more than 70%, and FX reserves now exceed $40 billion, the highest in nearly three years.
Additionally, diaspora remittances have doubled since last year, growing from an average of $300 million to nearly $600 million monthly as of August 2024. This surge follows the introduction of new financial products tailored for Nigerians abroad, including the Non-Resident Nigerian Ordinary Account and Investment Account.
“These initiatives are designed to integrate our diaspora into the financial system and create channels for secure investment and savings,” Cardoso explained.
Stakeholder Endorsements and Economic Impact
Industry stakeholders have endorsed the CBN’s backward integration strategy. Gbolahan Awonuga, Executive Secretary of ALTON, stressed the importance of local production, urging the government to provide necessary infrastructure, particularly electricity, to support manufacturers.
Charles Abuede, Research Head at Cowry Asset Management, noted that telecoms’ heavy dependence on FX has contributed to naira volatility. He believes that with a stable business environment and improved infrastructure, companies can successfully shift to local sourcing—enhancing profitability and economic resilience.
Looking Ahead
CBN’s strategic shift toward non-oil FX generation marks a significant pivot in Nigeria’s economic direction. With the global energy landscape evolving and oil revenues under threat, strengthening domestic industries, supporting export-oriented businesses, and empowering the diaspora community are emerging as critical pathways for sustainable growth.
