The global economy entered the month on a fragile footing, and the escalation of tensions around the Strait of Hormuz triggered a sharp repricing across energy markets. Oil moved above $110 per barrel, not as a demand-driven rally but as a supply shock.
March 2026 marked a clear shift in the macroeconomic trajectory, both globally and in Nigeria, with the external environment becoming the dominant force shaping domestic outcomes. Nigeria’s macroeconomic space in March was a month of consolidation of reforms that have been gaining traction since last year. The month started on a down note due to the geopolitical situation, which began in the last days of February and carried into the new month. This raised concerns about future inflation spikes and economic instability.
Nigeria entered this environment from a position of improving macro stability. Inflation had been on a sustained downward trend, with headline figures declining to 15.06% by February from 15.10% the previous month. This reflects the ongoing disinflation trend from the much higher levels seen in 2024, though food prices still exerted some pressure with year-on-year food inflation at around 12.12%. Core inflation remained firm at about 15.8%, suggesting that underlying price pressures in non-food items have not yet fully subsided.
This disinflation path was supported by tighter monetary policy, relative exchange rate stability, and base effects. At the same time, foreign exchange reforms were beginning to gain credibility. Liquidity in the FX market improved, and the naira traded within a more stable band, supported by better reserve dynamics and reduced speculative pressure.
However, the global oil shock in March disrupted this trajectory. The transmission into Nigeria was both direct and immediate, as the economy remains highly sensitive to energy prices despite its status as an oil producer. The increase in crude prices fed into domestic fuel costs, with petrol prices reaching record levels at N1270. This exposed a structural paradox: even as the Dangote Refinery ramped up, domestic fuel pricing remains anchored to international benchmarks.
Global prices offered a positive surprise as Brent and Nigerian crude rose notably in early March due to geopolitical tensions, often trading well above the 2026 budget benchmark of around $64.85 per barrel. This creates extra revenue potential for government spending plans. However, Nigeria’s actual crude oil output continued to lag behind its OPEC quota of 1.5 million barrels per day. Production averaged roughly 1.4–1.47 million barrels per day in recent months, with shortfalls persisting due to ongoing challenges like theft, pipeline issues, and insecurity in the Niger Delta. This gap has led to missed revenue opportunities despite higher prices.
At the same time, the increase in oil prices creates a fiscal offset. Government revenues improve, providing short-term relief to fiscal balances and potentially reducing borrowing needs. This introduces a classic policy trade-off. Higher oil prices support public finances and external reserves, but they also tighten financial conditions for households and businesses by raising costs. The net effect on growth
becomes ambiguous. Consumption weakens under inflation pressure, while government spending capacity improves. The balance between these forces will determine the growth path over the next two quarters.
The inflation outlook, therefore, shifted within the month. What had been a clear disinflation trend is now at risk of reversal. Higher fuel prices raise transportation costs, which feed into food distribution and the pricing of core goods. Given the weight of food in Nigeria’s CPI basket, this second-round effect is significant. March effectively represents the point at which imported inflation, via energy, re-enters the
system.
The Exchange Market
Nigeria’s foreign exchange reserves and exchange market presented a picture of cautious stability for the month of March. The exchange rate roughly hovered stable, with a starting value of N1,376/$ and a closing value of N1,387/$, showing a depreciation of 0.79%. The
rate showed minor daily fluctuations but no major depreciation or appreciation spikes, with volatility low.
The slight erosion was mainly attributed to external debt service obligations and ongoing interventions by the CBN in the foreign exchange market to support the naira and manage liquidity demands. The average exchange rate for the month stood approximately at ₦1,527/$.
These movements reflected ongoing demand for foreign currency amid imports, debt obligations, and seasonal factors, balanced partially by CBN dollar sales to smooth volatility.
The depreciation trend in March reversed some of the gains seen in the early part of 2025, as external factors such as global oil price fluctuations and higher demand for dollars for invisibles contributed to selling pressure. However, the CBN maintained active market participation, injecting dollars at various intervals to defend the currency and prevent disorderly movements. This helped keep the official rate relatively stable compared to more turbulent periods in prior years.
In the foreign exchange market, the outlook projected that the naira would face mild to moderate depreciation pressures through April. Overall, the market environment pointed toward a consolidation phase rather than sharp swings, supported by the CBN’s willing-buyer,
willing-seller framework, but vulnerable to any spikes in global oil price weakness or heightened import demand.
Gross External Reserve
Nigeria’s gross external reserves recorded a modest 1.22% month-on-month decline to $49.29bn. This slight slip occurred despite the broader upward trajectory in reserves seen through late 2025 and early 2026, during which gross reserves had climbed significantly from around $40 billion at end-2024 to over $45 billion by end2025 and further toward the $50 billion mark in early 2026.
Heightened geopolitical tensions among the US, Israel, and Iran triggered risk aversion among global investors, prompting a flight to safety that dampened foreign portfolio inflows. Even though global oil prices surged above $100, this did not translate into a meaningful boost to Nigeria’s foreign exchange receipts, as production constraints played a major role here.
On a policy front, the Central Bank of Nigeria’s new policy, introduced around late March 2026, allowed International Oil Companies (IOCs) to fully repatriate 100% of their export proceeds without previous retention or cash-pooling restrictions. This move was designed to liberalise the FX market, attract more upstream investment, and improve transparency. It contributed to short-term outflows as IOCs moved dollars offshore more freely, thereby reducing reserves.
Looking ahead, Nigeria’s foreign reserves are stabilising or showing a modest recovery. Higher Brent crude prices, sustained well above Nigeria’s 2026 budget benchmark of roughly $65 per barrel due to supply disruptions and fears around the Strait of Hormuz, should begin translating into stronger FX inflows from crude exports, although production capacity still remains a constraint.
