The naira has entered November on a stronger footing, supported by rising crude oil prices, improved production and growing foreign exchange reserves.
Bonny Light, Nigeria’s benchmark crude grade, is selling at about $115 per barrel. Higher global risk premiums and supply disruptions have pushed oil prices upwards, increasing Nigeria’s earnings from crude exports.
The stronger dollar inflows are improving the Central Bank of Nigeria’s (CBN) ability to support the foreign exchange market and meet demand for imports and profit repatriation.
Nigeria’s crude oil production has also risen above 1.53 million barrels per day. Including condensates, output stands at about 1.7 million barrels per day. This is the highest level in four years and above the country’s OPEC quota. Improved security in the Niger Delta and fewer cases of pipeline vandalism have helped drive the increase.
Gross external reserves are now around $55 billion, while net reserves have reached a record $46 billion. These reserves provide protection against speculative pressure and sudden currency falls. They also help the CBN service external debt and defend the naira.
The CBN is further supporting the currency by tightening liquidity through open market operations. This has helped keep naira yields attractive to foreign portfolio investors, while the benchmark interest rate remains at 23 per cent.
Local refining is also easing pressure on foreign exchange. The Dangote refinery and other plants are reducing the need for petrol imports, which previously placed a heavy burden on dollar demand.
The naira has recently traded between ₦1,330 and ₦1,370 to the dollar. The official interbank rate stands at ₦1,346, close to the middle of that range. Meanwhile, the parallel market rate is between ₦1,380 and ₦1,390, leaving a manageable gap between both markets.
However, the naira still faces risks. A sharp fall in global oil demand or a disruption to Nigerian production could reduce dollar inflows and push the exchange rate beyond ₦1,350 per dollar. Renewed unrest in the Niger Delta remains an immediate concern.
The recent production increase has mainly come from improved pipeline operations rather than new deepwater or affiliate production. Output also remains below the two million barrels per day assumed in the national budget, keeping concerns about government deficit financing alive.
On the positive side, faster external borrowing inflows or increased foreign investment in local debt could strengthen the naira further and test the ₦1,320 level against the dollar.
The outlook depends largely on sustained high oil prices and strong production. In the longer term, a fall in crude prices remains a major concern, making foreign exchange reforms and growth in non-oil exports increasingly important.
