Despite suggestions that Nigeria’s exchange rate has recently shown reduced sensitivity to oil price movements, market analysts maintain that crude oil and the naira remain fundamentally interconnected.
Cowry Asset Management Limited stated in its latest investor briefing that the trajectory of the foreign exchange market continues to be closely linked to global oil dynamics, particularly given Nigeria’s heavy reliance on hydrocarbon exports for FX inflows.
Historically, fluctuations in crude prices have significantly influenced the naira’s valuation. Although Nigeria has pursued economic diversification, oil exports still account for a substantial share of foreign currency earnings.
Global oil prices strengthened last week amid renewed geopolitical tensions. Brent crude advanced by $4.01, or 5.92% week-on-week, closing around $71.76 per barrel. West Texas Intermediate (WTI) gained $3.59 to settle at $66.48 per barrel.
The rebound follows renewed geopolitical concerns after U.S. President Donald Trump warned Iran of serious consequences if nuclear negotiations fail within a short timeframe, fueling fears of potential supply disruptions.
AIICO Capital analysts noted that crude prices have now recovered after three consecutive weeks of decline, supported by short-covering and geopolitical risk premiums.
Meanwhile, the naira posted weekly gains across both official and parallel markets. At the official window, the currency appreciated 0.68% to N1,346.32 per dollar. In the parallel market, it strengthened more sharply by 4.44% to N1,333.28 per dollar.
The week began with the spot FX rate firming to N1,336 per dollar, reflecting improved supply conditions and foreign portfolio inflows. However, as demand pressures resurfaced, the naira experienced midweek weakness before closing at N1,346.30 — still posting a net weekly gain of N9.1 per dollar.
External reserves provided additional support, rising by $555.38 million to reach $48.50 billion. Analysts attribute this increase to improved FX inflows and sustained investor confidence.
Cowry Asset Management Limited expects the naira’s recent appreciation to contribute to ongoing exchange rate stability, particularly if crude prices remain elevated. Higher oil prices typically strengthen Nigeria’s reserve position and enhance FX liquidity.
However, analysts warn that volatility in global oil markets and evolving geopolitical risks could trigger short-term fluctuations in both oil and currency markets.
Overall, market experts project that the oil–FX relationship will remain intact. As long as crude prices sustain current levels or trend higher, positive momentum for the naira is likely to persist.
