Naira Breaks Free From Oil Price Volatility

Naira Breaks Free From Oil Price Volatility
Naira Breaks Free From Oil Price Volatility
Nigeria’s currency, the naira, has surprisingly decoupled from the price of oil, its main foreign-exchange earner.

Gatekeepers Newreports that despite oil prices falling, the naira has stabilized, trading around 1,530 per dollar, largely flat on a year-to-date basis.

Analysts expect the naira to end 2025 near 1,556 per dollar, its average exchange rate in the first six months of 2025, after a 41% slump in 2024.

According to Ayo Salami, chief investment officer at Emerging Markets Investment Management Ltd., the naira’s stability can be attributed to; Undervaluation, Higher Non-Oil Exports, Lower Import Demand.

Additional factors contributing to the naira’s stability include; Weakening US Dollar, Foreign-Exchange Reforms, Global Risk Conditions.

A Bloomberg index for local bond performance is at a record high and has returned 19% this year, its best first-half performance since December 2020. The gauge for emerging-market local debt has returned 12% in the period. Stocks in the West African nation are up 18% this year.

“The NGN has become more correlated with global risk conditions,” said Samir Gadio, head of Africa strategy at Standard Chartered Plc. “Risk conditions have since improved materially; this has supported renewed portfolio flows into Nigeria debt even with oil prices currently below $70 per barrel.”