Nigeria’s currency appears to be decoupling from the price of oil, the nation’s main source of foreign exchange, as the naira holds steady despite falling crude prices.
After initial volatility in the first half of the year, the naira has stabilised even as global oil prices declined. The currency traded around 1,530 per dollar on Tuesday, largely flat on a year-to-date basis, marking a sharp contrast to its previous sensitivity to fluctuations in oil markets.
Analysts from Deutsche Bank AG to CardinalStone expect the naira to end the year close to 1,556 per dollar—its average exchange rate in the first six months of 2025—after it slumped by 41% in 2024.
“The currency has shown remarkable resilience in recent months despite the pressure from weaker oil prices,” said a Deutsche Bank analyst. “This is a clear indication that the naira is beginning to break free from its traditional correlation with crude oil.”
CardinalStone analysts echoed this view, noting that “the stability of the naira, even in the face of declining oil revenues, suggests that other factors—such as tighter monetary policy and improved market confidence—are playing a larger role in determining exchange rate dynamics.”
“After some initial volatility in the first half, the naira stabilised even as oil prices fell,” noted the Bloomberg report.
Looking ahead, major financial institutions such as Deutsche Bank AG and Cardinal Stone forecast the naira ending 2025 near ₦1,556$, closely mirroring its average first-half rate and suggesting minimal further depreciation.
This performance is particularly notable because past naira volatility closely tracked oil price swings. For instance, earlier this year, the currency briefly weakened when oil dipped and money-market rates softened .
But the latest data shows a break from that pattern: even as Brent crude and other benchmarks softened, the naira held firm. Analysts attribute the resilience to ongoing structural reforms—including tighter monetary policy, alignment between official and parallel forex rates, and improved FX market liquidity—measures implemented since President Bola Tinubu’s administration reshuffled the Central Bank leadership and lifted currency restrictions in June 2023.
“When we talk to investors, they’re happy. They can invest in Nigeria, and when they want, they can bring their proceeds out,” said Axel Schimmelpfennig, IMF mission chief, praising reforms that brought balance to supply and demand in forex markets.
Still, risks remain. Bloomberg noted that if oil prices slide further or foreign capital inflows retreat, the naira could come under pressure once again . Meanwhile, the IMF recommends caution, urging Nigeria to build buffers, maintain tight monetary policy, and recalibrate its 2025 budget assumptions to reflect lower oil revenues around $68barrel below the budget expectation of $75/barrel.
While some economists caution that the trend is still in its early stages, the current stability offers a glimmer of hope for a country seeking to diversify its economy and reduce its dependence on oil.
Boluwatife Enome
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