Nigeria’s export competitiveness could significantly improve if the country prioritizes increasing oil production and implements strategic exchange rate adjustments.
This was the view of Samson Esemuede, MD/CIO of Zrosk Capital, who highlighted the critical relationship between oil production, foreign exchange stability, and Nigeria’s export competitiveness while speaking on the 10th episode of Drinks and Mics.
Drinks and Mics is a Nairametrics TV podcast hosted by Ugo Obi-Chukwu, CEO of Nairametrics.
You can watch the full video here:
Esemuede explained that achieving foreign exchange stability requires a structured approach that prioritizes non-oil exports.
However, he noted that this transition takes time and necessitates supply-side reforms.
“I had a mental framework around our path to foreign exchange stability. Obviously, the ultimate goal with regard to exchange rate reforms is to promote your non-oil export as a proportion of total export. To do that, you require a lot of supply-side reforms, and that takes a bit of time. There’s a sequence to get there,” he stated.
According to him, the initial steps include increasing Foreign Portfolio Investments (FPIs), enhancing remittances, and stabilizing the economy by reducing imports relative to exports in response to exchange rate pressures. In the short term, boosting oil revenues remains a key priority.
As Africa’s largest oil producer, Nigeria’s economy heavily relies on crude oil exports, making production levels and currency valuation critical to its global trade positioning.
Oil Production and Economic Stability
Esemuede emphasized that increased oil production could provide a stable revenue base for reinvesting in critical infrastructure, which would ultimately enhance Nigeria’s competitiveness in non-oil exports.
“If oil volume goes up, and oil price stays where it is, then that creates some sort of stability that also promotes your ability to reinvest into long-term supply-side factors such as ports, de-bottlenecking, road infrastructure, rail infrastructure, that then allows you to be competitive,” he noted.
He pointed out that Nigeria is already making strides in this regard, citing Seplat Energy’s improving production targets as an example.
Esemuede further argued that exchange rate adjustments have led to a reduction in unit labor costs, which could make Nigerian exports more attractive in global markets.
“I also think the collapse in the unit labour costs we’ve had as a consequence of the exchange rate adjustments makes exports really interesting,” he added.
More insights
- Brent Crude fell to $70.5 per barrel, while West Texas Intermediate (WTI) dropped to $67.56 during the week.
- Nigeria’s flagship crude, Qua Iboe, declined by 1.9% to $74 per barrel, while Brass River fell by the same margin to $73 per barrel.
- The decline in crude prices, industry watchers say, poses a direct threat to Nigeria’s revenue targets, as the government benchmarked oil at $75 per barrel and production at 2 million barrels per day (mbpd) in its 2025 budget.
- During the week, Nairametrics reported that Nigeria’s oil production surged in February, exceeding its OPEC quota of 1.5 million barrels per day by 70,000 bpd, and contributing to the cartel’s increased output in February.
