Nigeria’s foreign exchange utilisation by the industrial sector fell by $1 billion in the first half of 2026 as manufacturers adopted backward integration and expanded export activities, according to industry analysts. Data from the Central Bank of Nigeria’s Q2 bulletin shows industrial-sector utilisation declined 21.2 percent to $3.72 billion in the six months to June 2026, down from $4.72 billion in the same period of 2025.
The $1.11 billion surge in foreign exchange utilisation for manufactured products to $2.14 billion, a 107.4 percent increase from $1.03 billion, contrasts with the industrial sector’s decline, with Ayokunle Olubunmi of Agusto & Co. attributing this partly to local production of previously imported inputs.
Backward Integration and Export Expansion
Some companies are adopting backward integration while others expand export activities, allowing firms within the same group to supply one another and reduce foreign exchange demand, Olubunmi said. The shift could ease pressure on Nigeria’s external reserves and support employment as manufacturers increase domestic production.
The divergent movements across sectors suggest lower industrial-sector utilisation has not translated into broad-based declines in foreign exchange demand. The sector remained the largest of seven categories in the CBN table, followed by oil at $2.15 billion and manufactured products at $2.14 billion.
Oil Sector and Refining Expansion
Foreign exchange utilisation by the oil sector fell 18.7 percent to $2.15 billion in the first half of 2026, from $2.64 billion a year earlier. The $494.47 million reduction followed a sharp increase in 2025, when the category rose from $816.65 million in the first half of 2024 to $2.64 billion. Developments in domestic refining could influence future foreign exchange demand as the Dangote Refinery expands capacity from 650,000 to 1.4 million barrels per day.
Rising Demand in Transport and Other Sectors
The transport sector recorded a 41.3 percent increase in foreign exchange utilisation to $523.75 million in the first half of 2026, from $370.55 million in the same period of 2025. Ismail Abiodun Taiwo, senior research associate at Anchoria Capital Group, identified vehicle imports—including engines, tyres and electric vehicles—as contributors to transport-sector foreign exchange demand, along with growing demand for brands like Jetour, BYD and Geely.
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Food-product utilisation rose 11.4 percent to $1.19 billion from $1.07 billion, while agricultural-sector utilisation increased 18.9 percent to $106.64 million from $89.71 million. Mineral-sector utilisation also rose 25.3 percent to $143.45 million from $114.47 million.
Tariff Policy and Mixed Outlook
The changes in sectoral foreign exchange utilisation come against Nigeria’s 2026 tariff policy, which combines reductions in tariffs on several categories with higher protection for manufactured products. An analysis shows a net tariff reduction of 569 percentage points for the industrial sector, alongside reductions of 228 percentage points for food products and 120 percentage points for transport.
However, the effectiveness of the approach could be constrained by Nigeria’s dependence on imported goods and weak substitution between imported and locally produced products. The rise in manufactured-products foreign exchange utilisation, despite higher tariff protection, highlights the need to assess whether domestic producers can meet demand at competitive prices.
Tariff Policy Impact and Challenges
Minerals, agriculture, and oil also experienced tariff cuts of 59, 46, and 15 points respectively.
In contrast, manufactured products faced a net tariff increase of 30 points, reflecting policy intent to reduce imports of finished goods. Nigeria’s reliance on imported goods and weak substitution between imported and local products may limit the policy’s effectiveness in curbing import demand.
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