Nigeria’s industrial sector reduced its foreign exchange utilisation by $1 billion in the first half of 2026, as manufacturers increasingly turn to locally sourced materials and expand domestic production.
Data from the Central Bank of Nigeria’s second-quarter bulletin show that foreign exchange utilisation by the industrial sector fell by 21.2 per cent to $3.72 billion between January and June 2026, compared with $4.72 billion in the same period of 2025.
Industry analysts attribute part of the decline to backward integration, a strategy that allows manufacturers to produce or source locally some of the raw materials they previously imported.
The approach can reduce exposure to exchange-rate fluctuations and help companies manage production costs.
Ayokunle Olubunmi, head of financial institutions ratings at Agusto & Co., said local production and export expansion were contributing to changes in manufacturers’ foreign exchange needs.
Companies with interconnected operations can also supply one another, reducing their dependence on imported inputs.
However, the decline in industrial-sector foreign exchange utilisation does not mean demand for dollars has fallen across the entire economy.
Foreign exchange utilisation for manufactured products more than doubled to $2.14 billion in the first half of 2026, from $1.03 billion a year earlier.
The development highlights the uneven impact of Nigeria’s shift towards local production.
While domestic sourcing can reduce import dependence, manufacturers still face challenges such as high energy costs, infrastructure gaps and limited local supplier capacity.
Sustaining the reduction in foreign exchange demand will depend on manufacturers’ ability to expand local supply chains, improve production efficiency and compete with imported products.
Greater domestic production could also support employment and strengthen Nigeria’s industrial base over time.
Source: Read the reproduced BusinessDay report
