Central Bank of Nigeria (CBN) Governor Olayemi Cardoso has reaffirmed the bank’s commitment to strengthening economic ties between Nigeria and Saudi Arabia, emphasizing the potential for deeper cooperation in trade, investment, and financial relations. Speaking during a high-level meeting with Talal Al-Humond, Assistant Governor for Monetary Affairs at the Saudi Arabian Monetary Authority (SAMA), Cardoso highlighted the importance of leveraging Saudi Arabia’s economic transformation initiatives as a model for Nigeria’s economic development.
The discussions took place on the sidelines of the inaugural Conference on Emerging Markets Economies in Riyadh, co-organized by the Saudi Ministry of Finance and the International Monetary Fund (IMF) Regional Office. Cardoso noted that Saudi Arabia’s commitment to economic diversification, infrastructure investment, and innovation presents valuable lessons for Nigeria as it seeks to stabilize its economy and attract foreign investment.
Furthermore, the CBN is actively engaging the Nigerian diaspora in the Middle East to improve remittance flows and strengthen the country’s financial sector. By collaborating with diaspora communities, the CBN aims to harness their potential contributions to national development.
Could Saudi Arabia Lend to Support the Naira?
Saudi Arabia has a history of extending financial aid to countries facing foreign exchange crises, often leveraging its vast oil wealth and sovereign investment funds. Countries such as Pakistan, Egypt, and Bahrain have received substantial financial support from Saudi Arabia in the form of deposits, credit facilities, and direct investments aimed at stabilizing their currencies.
Pakistan, for example, has benefited from multiple rounds of Saudi financial assistance, including a $3 billion deposit in its central bank to help shore up dwindling forex reserves. Similarly, Saudi Arabia has provided direct financial aid to Egypt to ease pressure on its foreign reserves and stabilize its economy.
If Nigeria were to seek a similar arrangement, it could request a deposit from the Saudi Arabian Monetary Authority (SAMA) into the CBN’s reserves. Such a move would provide a liquidity boost, strengthening the CBN’s ability to manage forex market fluctuations and maintain stability in the naira-dollar exchange rate. Additionally, Saudi Arabia could extend a credit line or investment-backed financing that aligns with Nigeria’s strategic economic objectives, such as energy and infrastructure development.
However, securing financial support from Saudi Arabia would likely come with economic and diplomatic considerations. Riyadh may require assurances on Nigeria’s economic policies, structural reforms, or investment guarantees before committing funds. Saudi debt is considerably cheaper than the Eurobonds that Nigeria has relied on to support the naira, typically with an interest rate of 4%.
Despite the economic pressures facing Nigeria, it remains unclear whether Governor Cardoso is actively seeking Saudi financial assistance to stabilize the naira. His statements thus far have focused on strengthening trade and investment relations rather than direct financial support such as the cash deposits which countries like Pakistan have received from the Saudis. But given Nigeria’s modest forex reserves and the CBN’s continued interventions to maintain naira stability, the possibility of Saudi financial support remains an open question.
A direct injection of dollars into the CBN by Saudi Arabia would likely necessitate Nigeria securing an IMF-backed economic programme, as this has increasingly become a prerequisite for the oil-rich nation when providing financial support to countries struggling with currency instability. Fearing domestic political backlash over borrowing from the International Monetary Fund, Nigeria has largely avoided seeking IMF assistance, despite the significantly lower interest rates it offers compared to other external financing options, especially Eurobonds.
By deepening economic ties with Saudi Arabia, Nigeria aims to attract foreign investment, enhance trade relations, and learn from Saudi Arabia’s successful economic diversification strategies. As both nations explore avenues for mutual growth, the focus will likely be on sectors such as energy, agriculture, and infrastructure. Strengthened economic cooperation between Nigeria and Saudi Arabia holds the promise of significant benefits, including job creation, technological transfer, and improved economic resilience for both countries.
