Naira Breaks Free from Oil Dependency as Currency Holds Steady Despite Price Slump

Nigeria’s naira is showing signs of resilience and stability, decoupling from its historical dependence on crude oil prices, according to a Bloomberg report. Despite a global downturn in oil prices—traditionally Nigeria’s key source of foreign exchange—the naira has remained relatively stable, trading around ₦1,530 to the dollar. This represents a major shift from past trends where the naira would weaken sharply in tandem with oil market declines.

The currency’s stability follows a period of intense volatility in early 2025 but has since held firm, with analysts from institutions like Deutsche Bank AG and CardinalStone forecasting a year-end exchange rate of around ₦1,556 to the dollar—consistent with its average over the first half of the year. This is a notable turnaround after a 41% depreciation in 2024, signaling increasing investor confidence and policy effectiveness.

Analysts attribute this newfound resilience to several structural reforms introduced by the Tinubu administration, including tighter monetary policy, better alignment between official and parallel market forex rates, and improved liquidity in the FX market. These reforms began in June 2023, when the Central Bank leadership was reshuffled and currency controls were lifted, signaling a shift toward more market-driven policies.

International financial bodies, including the IMF, have acknowledged these gains. IMF mission chief Axel Schimmelpfennig noted growing investor satisfaction and improved capital flow flexibility. However, caution remains, as risks such as further drops in oil prices or declining foreign capital inflows could test the naira’s durability. The IMF recommends Nigeria build fiscal buffers and align its 2025 budget more realistically with current oil market trends.

While some economists advise waiting to see if this decoupling trend sustains over time, many agree that the current trajectory is a positive development. It suggests that Nigeria is making real progress in reducing its economic reliance on oil—a critical step toward achieving a more diversified and resilient economy.

Source: Arise