E-Financial
What Does Sub-Zero Oil Mean for Nigeria’s Economic Outlook?
By Lukman Otunuga, Senior Research Analyst at FXTM,
April 20, 2020 will go down in the history books as the day when WTI crude futures expiring in May plunged more than 300 percent, falling as low as minus $40.32 per barrel amid COVID-19 pandemic lockdowns.
Utter chaos ensued after the US benchmark prices for crude Oil went sub-zero for the first time ever, driven down by the producer’s desperate attempt to pay buyers to take the commodity off their hands. This was due to fears that storage capacity could run out in May.
As Oil sank, tanker stocks soared, reflecting an intense increase in demand for crude storage space. It says a lot about the unprecedented nature of the coronavirus pandemic when we see that the fastest-growing demand trend in the Oil markets is for storage space.
Prices rose spasmodically after Iran launched its first military satellite, earning President Donald Trump’s ire. But this has not changed the fundamental themes weighing on Oil.
For Nigeria, these fundamental themes of collapsing demand and oversupply are big headwinds even if the country’s Oil is benchmarked against Brent Crude. The Nigerian state depends on Oil for 60 percent of its revenues and 90 percent of its foreign exchange. But with prices for several Oil benchmarks falling below zero, Nigeria is generating massive losses for every barrel it produces, meaning the economic outlook is growing more precarious.
It’s likely that foreign exchange reserves will stay on the firing line while the Naira remains exposed to downside shocks. A further weight on the currency and government revenues is that Nigeria spent four times as much moneysubsidising fuel versus building schools, health centres and science labs in 2019. Another inefficiency which may come back to haunt is the fact that Nigeria produces crude Oil which is sold to the US, China and Europe only to re-import natural gas at higher prices.
With the cost of producing Oil at around $15-$17 per barrel, the current volatility and weakness in Oil prices may fuel fears of a sovereign debt crisis. Nigeria’s total debt stands at around $84 billion with up to 80% of its bilateral debt owed to China. Already, Fitch Ratings has cut Nigeria’s Long-Term Foreign Currency Issuer Default Rating (IDR) to B from B+.
Weakening outlook notwithstanding, Nigeria is making the same choice as most other world governments – to stop the spread of coronavirus. The plan is to raise as much as $6.9 billion from multilateral lenders to help fund efforts to stop the disease in its tracks.
This is the right choice, and could give the economy a better chance to recover more quickly after the pandemic ends.
Meanwhile, the short-term outlook for Oil prices remains grim due to demand destruction and slowing global growth after China experienced an economic contraction in Q1 on top of a lack of storage space.
Given that Oil sector weakness is set to remain a dominant theme in the short-to-near term, Nigeria must act fast and break away from the chains of Oil reliance to other sustainable sources of growth. Diversification is the lifesaving elixir to Nigeria’s ailments but the benefits will not happen overnight.
Digitalisation has become a hot trend in many countries as populations and governments seek to reduce human contact but increase human connection. In the same vein, the government’s ‘Change’ agenda has never been more important than it is now. Technology and innovation may be the focus of increased investment as other economic sectors come to a standstill under lockdowns.
To sum up the new reality, Nigeria has displayed resilience to external and domestic risks in the recent past but the coronavirus pandemic and collapsing Oil prices could present one of the biggest economic tests in its history. Will Nigeria be able to weather the storm, evolve and rise from the ashes like a phoenix or will Africa’s largest economy face the same fate as Venezuela and Zimbabwe?
My sincere hope is that the economy will adapt quickly, resulting in a faster-than-expected comeback.
Central Bank of Nigeria (CBN) has debunked rumours suggesting that Polaris Bank is undergoing liquidation, assuring the public that the country’s banking system remains stable and secure.
Polaris Bank
The apex bank disclosed this in a post on X, where it shared a screenshot of a viral claim and flagged it as false.
It clarified that the claims, suggesting Polaris Bank had failed to meet recapitalisation requirements and was set for liquidation, are entirely false and do not reflect the current state of the Nigerian banking sector
“The Central Bank of Nigeria has noticed reports, in certain media outlets, about a recommendation for the Federal Government to take over some CBN-supervised financial institutions,” said Hakama Sidi-Ali, apex bank’s acting Director, Corporate Communications, in a statement.
“To avoid any doubt, Nigerian banks are still safe and sound. The CBN advises the public to go about their daily lives without getting disturbed by reports regarding the health of Nigerian banks that have not come from the CBN.
“The CBN is fully equipped to carry out its statutory duty of ensuring the stability of Nigeria’s financial system. “We assure the general public and depositors that their funds are safe in Nigerian financial institutions. “Bank customers are therefore advised to proceed with their banking transactions as u
The clarification was after a viral post, claiming that Polaris Bank was facing liquidation for failing to meet the Bank’s recapitalisation requirements, and could soon lose its operating licence, with the Nigeria Deposit Insurance Corporation set to take over the process.
It further alleged that founder of the Eleganza Group, Razaq Okoya, had made a bid to acquire and revive the bank, pending approval from regulators and shareholders.
Sharing a screenshot of the viral claim, however, the apex bank flagged it as “fake content.”
It clarified that the claims, suggesting Polaris Bank had failed to meet recapitalisation requirements and was set for liquidation did not reflect the current state of the Nigerian banking sector.
“This content is fake. Let the public be guided. The Nigerian Banking System is Safe and Secure,” the bank said.
On April 1, the CBN confirmed that 33 banks successfully met the revised minimum capital requirements under its recapitalisation programme, marking a significant milestone in strengthening the financial system.
African Development Bank Group (AfDB) has approved a $200 million loan to Nigeria to support a landmark digital infrastructure initiative aimed at expanding broadband access, developing digital skills and driving large‑scale job creation.
The financing will support the Digital Value Chain Infrastructure for Boosting Employment project, known as D‑VIBE or Project BRIDGE. The initiative seeks to deploy about 90 000 kilometres of new open‑access fibre optic cable across Nigeria, extending the national fibre backbone from roughly 30 000 km to about 120 000 km.
The expanded network will connect all 774 local government areas, including schools, hospitals, agro‑industrial zones, rural communities and commercial centres. It will also establish cross‑border digital links with Benin, Cameroon, Niger and Chad, strengthening regional integration.
Nigeria is Africa’s most populous country and West Africa’s largest economy, with the digital sector increasingly contributing to gross domestic product growth. The project is expected to close major connectivity gaps, raise productivity and unlock job opportunities for young people.
D‑VIBE is structured as a public‑private partnership through a special purpose vehicle, with public ownership capped at between 25% and 49% and private sector participation ranging from 51% to 75%.
This structure is intended to address high fibre rollout costs, including construction and right‑of‑way challenges.
The African Development Bank loan forms part of an $800 million sovereign financing package, alongside $500 million from the World Bank and $100 million from the European Bank for Reconstruction and Development.
Total project financing is estimated at $2 billion, including a $25.79 million European Union grant, a $2.6 million Multilateral Cooperation Centre for Development Finance preparation grant and at least $1.2 billion in private sector investment.
“Nigeria has the talent, the market and the ambition, but lacked the backbone infrastructure to connect opportunity with potential,” said Abdul Kamara, Director General of the African Development Bank Group’s Nigeria Office.
“This project will deliver high‑speed connectivity nationwide and equip young people to build digital careers.”
Beyond physical infrastructure, the project will support affordable devices, large‑scale digital skills training and digital platforms in priority sectors. It also includes cybersecurity, competition reforms and resilience measures, including greater use of renewable and hybrid power.
D‑VIBE is expected to help create up to 2.8 million jobs and raise broadband penetration from 45% to around 70% by 2030. The project aligns with Nigeria’s Vision 2050 and continental development priorities.
World Bank has warned that Nigeria faces a deepening early childhood development crisis in health, nutrition, and learning, threatening long-term productivity and economic growth amid persistent poverty.
World Bank
In its April 2026 Nigeria Development Update, “Nigeria’s Tomorrow Must Start Today: The Case for Early Childhood Development,” the bank noted moderate 2026 growth driven by services like ICT, financial services, and real estate, following 4.0 per cent GDP expansion in 2025. Inflation eased to double digits via tight policy, stable exchange rates, and better food supply, while reserves hit $45.5 billion gross by end-2025, covering 8.7 months of imports.
Fiscal deficit widened slightly as non-oil revenues rose to 8.5 per cent of GDP from improved tax administration, e-filing, and VAT e-invoicing, though wage growth lagged inflation, leaving real incomes strained and poverty unchanged.
The bank highlighted poor outcomes with 110 of 1,000 children dying before age five, 40 per cent stunted, and 52 per cent developmentally off-track at school entry—gaps three times wider in poor households and exceeding 40 points between rich and poor. It urged investment in the first 2,000 days for better education, earnings, health, and cohesion.
Regionally, Sub-Saharan Africa’s 2026 growth forecast dipped to 4.1 per cent from 4.4 per cent due to Middle East conflict inflating fuel and fertiliser costs.
Finance Minister Wale Edun countered with recovery signs: falling inflation, rising non-oil revenues, declining debt-to-GDP, and stabilising naira via digital tracking, audits, and PPP shifts. Budget Director Tanimu Yakubu described reforms as correcting imbalances from subsidies and multiple rates, boosting FAAC revenues 40 per cent and reserves over $40 billion, with debt under 30 per cent of GDP.
NACCIMA President Jani Ibrahim called for data-driven strategies amid tax changes, inflation, and global tensions, eyeing AfCFTA, digital economy, and green investments for growth.
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