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The Central Bank of Nigeria (CBN) has sold $580.95 million into the FX market over the last two weeks to protect the Naira, amid increasing risk of crude oil price decline, according to a report by Cardinal Stone Partners.
This has brought CBN gross FX reserves down to $38.37 billion.
Brent crude prices have declined by 5.5% Year to date, driven by expectations of rising global crude supply, policy shifts, and weakening demand.
Historically, lower oil prices have had significant implications for Nigeria, often straining the current account position, reducing foreign inflows, weakening the Naira, and, in severe cases, pushing the economy into recession.
Eurobonds of African oil-exporting nations have also experienced a sharp sell-off in March 2025.
Given Nigeria’s significant role in the oil market, the country has led the downturn, with its aggregate sovereign dollar bond index declining by 2.4%—a steeper drop than Angola (-1.7%), Gabon (-1.6%) and Egypt (-0.7%).
Additionally, Nigeria’s Z-spread widened by 47.87 basis points, surpassing the increases seen in Angola (39.06bps) and Egypt (28.98bps), suggesting that investors may be pricing in more pronounced risk for the country.
Outlook for Nigeria oil production has also been negative in recent days.
A recent explosion occurred at the Trans-Niger Pipeline (TNP), which has a capacity of 450,000 barrels per day and transports crude oil from onshore fields to the Bonny export terminal.
Additionally, another explosion was reported at an oil facility in the Ogba/Egbema/Ndoni Local Government Area of Rivers State.
This facility plays a crucial role in transporting petroleum products for companies such as Seplat, Agip, and Shell, moving resources from ONELGA and parts of Imo State to Brass in Bayelsa State.
If the attacks on oil assets persist, investors’ concerns over Nigeria’s fiscal stability may intensify, particularly regarding the country’s ability to meet its oil production target of 2.06mb/d.
The weaker outlook for oil price and production could pose a risk to the full implementation of the N55.0 trillion 2025 budget.
“We project the fiscal deficit to reach N16.5 trillion—exceeding the government’s target of N13.08 trillion—pushing Nigeria’s debt level to 50.0% of GDP in 2025 (without GDP rebasing) or 30.2% (with GDP rebasing),” Cardinal Stone Partners analysts said.
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