FG Moves to Cushion Global Shock as Experts Warn of Risks to Naira, Trade System

The Federal Government of Nigeria says it has taken concrete steps to respond to rising global economic uncertainty triggered by geopolitical tensions in the Middle East, with Finance Minister Wale Edun outlining measures aimed at stabilising the economy and protecting households.

In a statement issued in Abuja, Edun said recent volatility in global energy markets—linked to tensions involving the United States, Israel and Iran—has affected Nigeria, but the government is responding by ramping up crude oil production, maintaining a liberal foreign-exchange regime and strengthening the naira-for-crude policy to stabilise domestic fuel supply.

He noted that Nigeria entered the current period of uncertainty with stronger macroeconomic fundamentals than during shocks such as the COVID-19 and the Russia-Ukraine War, citing reforms implemented since May 2023. According to him, crude output has risen to about 1.86 million barrels per day to boost foreign exchange earnings and fiscal revenues.

The minister also said government coordination across fiscal, monetary and trade policies has supported tariff reductions on key industrial inputs and helped sustain capital flows, adding that Nigeria’s reclassification as a frontier market by FTSE Russell—effective September 2026—reflects improved investor confidence.

Edun warned that the Middle East crisis is affecting Nigeria through three major channels: rising fuel and gas prices, shifting global capital flows and higher logistics costs driven by disruptions to shipping routes such as the Strait of Hormuz. Petrol prices have climbed from about ₦890–₦900 per litre to roughly ₦1,260–₦1,330, while diesel rose from about ₦1,100 to around ₦1,550 at peak levels.

Commenting on currency performance, Lukman Otunuga of FXTM said the naira has remained relatively stable compared with other African currencies but at a significant cost. He noted that Nigeria’s foreign-exchange reserves declined for 16 consecutive days through April 8 to about $48.94 billion, reflecting continued interventions by the Central Bank of Nigeria to defend the currency.

Otunuga added that easing inflation—projected at about 13.4 per cent year-on-year for March, down from 15.1 per cent in February—could create room for monetary policy adjustments, although geopolitical tensions continue to weigh on emerging markets and investor sentiment.

Meanwhile, the immediate past Vice President of the Association of Nigerian Licensed Customs Agents, Kayode Farinto, said recent reforms helped prevent Nigeria from slipping into recession but warned that inefficiencies in the planned Nigeria Single Window initiative could raise demurrage and storage costs for importers, with consumers ultimately bearing the burden.

Also reacting, David Adonri of Highcap Securities Limited said Nigeria faces a paradoxical situation as both an oil producer and importer-dependent economy. He explained that although higher crude prices could boost revenues, limited domestic supply to refineries—including the Dangote Refinery—reduces potential gains.

Adonri added that while recent market reforms have helped the economy adjust to external shocks, longer-term stability will require stronger supply-side policies to reduce import dependence and ease inflationary pressures across the economy.