The Federal Government is intensifying efforts to ramp up crude oil production as part of broader strategies to stabilise the naira and stimulate economic growth. Wale Edun, Minister of Finance and Coordinating Minister of the Economy, has reaffirmed the government’s commitment to increasing oil output, which is expected to ease the inflow of foreign exchange (forex) and strengthen the nation’s currency.
Addressing the Intergovernmental Group 24 during the IMF/World Bank meetings in Washington D.C., Edun underscored the importance of forex inflows to Nigeria’s foreign reserves and the naira’s relative stability. He noted that Nigeria has witnessed a consistent net forex inflow, averaging $2.35 billion per month over the first seven months of 2024, largely due to rising oil revenues and reforms in the foreign exchange market.
Edun stressed that the government is determined to achieve its target of producing two million barrels of crude oil per day (bpd) by the close of 2024. This production boost is expected to significantly enhance Nigeria’s fiscal revenues, providing the financial backbone needed to stabilise the naira and fund critical infrastructure projects.
Edun also highlighted the difficulties deposit money banks face in lending at single-digit interest rates, primarily due to the economic uncertainties in the country and the lucrative returns offered by treasury bills. He explained that banks are constrained in their ability to offer lower interest rates, not out of unwillingness but due to pressing capitalisation requirements and the competitive appeal of risk-free government securities.
The Finance Minister acknowledged the structural challenges in the banking sector, pointing out that high interest rates are a direct result of the broader economic landscape. Nevertheless, he emphasised the importance of addressing these issues to make borrowing more accessible and affordable for businesses.
Edun attributed the recent stabilisation of the naira to the substantial forex inflows that have bolstered Nigeria’s gross foreign reserves. The steady accumulation of reserves, coupled with a deliberate policy shift towards eliminating multiple exchange rates, has improved forex liquidity, thus enabling a more stable exchange rate regime.
Nigeria’s oil sector reforms, which aim to increase output and streamline operations, have been central to these gains. According to Edun, the government remains on course to boost oil production and diversify export revenues, thereby creating a more balanced economic foundation for long-term growth.
Edun also addressed Nigeria’s relatively low tax to GDP ratio, which currently hovers around 10%. He noted that the Federal Government is actively working to raise revenue by improving infrastructure investment and enhancing social safety net programmes. These reforms are intended to increase the revenue to GDP ratio, currently standing at approximately 15%, and drive fiscal sustainability.
Diversifying Nigeria’s economy, particularly its export base, is a priority for the government. Edun highlighted the service sector as a critical area for growth, noting the country’s large, youthful, and skilled population. “We need to capitalise on this human resource by exporting services,” he remarked, positioning the services sector as a key contributor to the country’s economic future.
The Finance Minister emphasised that the ongoing economic reforms, including those in the oil sector, would support fiscal resilience. He pointed to the government’s sustained efforts to diversify the economy away from oil dependency as crucial for building a robust and competitive economy in the coming years.
Looking ahead, Edun expressed optimism about Nigeria’s path to long-term economic stability. He cited the rise in foreign reserves, ongoing reforms in the oil sector, and efforts to diversify exports as indicators of a more resilient economic trajectory. The minister stressed that maintaining fiscal discipline, enhancing revenue growth, and managing foreign reserves will be essential to solidifying Nigeria’s position in the global market.
As Nigeria moves towards its production targets, the combined effect of increased oil output, structural economic reforms, and a more diversified export base is expected to not only stabilise the naira but also strengthen the nation’s economic framework, ensuring sustained growth and competitiveness in the global economy.
