LAGOS, Nigeria — May 6, 2025
A recent rally in Brent crude oil prices has provided a modest reprieve for the Nigerian naira, which has faced significant pressure in recent months due to fluctuating oil revenues and foreign exchange (FX) challenges. Brent crude, a global benchmark closely tied to Nigeria’s Bonny Light crude, surged past $70 per barrel in late April 2025, recovering from a low of $65 earlier in the month, driven by heightened geopolitical tensions and OPEC+ decisions to delay production increases. This uptick, while not fully reversing the naira’s struggles, has eased some strain on Nigeria’s economy, which relies on oil exports for approximately 90% of its foreign exchange earnings and 80% of government revenue.
The naira, which depreciated to N1,670 per US dollar in the parallel market in December 2024, appreciated marginally to N1,499.10 in the official FX market by March 2025, according to FMDQ data. Analysts attribute this stabilization partly to increased dollar inflows from higher oil prices. “The Brent rally means Nigeria earns more dollars from crude exports, reducing FX demand pressure and supporting the naira,” said Olumide Adesina, a financial market analyst. He noted, however, that the impact is tempered by Nigeria’s limited refining capacity and persistent oil theft, which siphon off potential revenue.
The Nigerian government’s October 2024 decision to sell crude oil to local refineries, like Dangote Refinery, in naira rather than dollars has had mixed effects. While intended to conserve FX reserves, the policy’s suspension in March 2025, due to a mismatch in naira-denominated crude supplies, highlighted ongoing structural issues. Energy expert Engr. Sani Yabagi emphasized that without discounted crude sales to local refineries, the naira’s gains from oil price rallies remain limited. “Nigeria’s economy doesn’t fully capitalize on high oil prices due to corruption and reliance on imported refined products,” he said.
Posts on X reflect cautious optimism, with users noting that the Brent rally could stabilize the naira if sustained, but warning of risks if prices fall below $60, as forecasted by J.P. Morgan. Nigeria’s $6 billion oil debt to fuel suppliers, reported in September 2024, continues to strain reserves, further complicating FX dynamics.
Despite the Brent rally, the naira’s outlook remains fragile. The Central Bank of Nigeria (CBN) has struggled to boost FX liquidity, and the nation’s external reserves have declined, limiting its ability to defend the currency. Diversification of non-oil exports and increased domestic refining capacity, as advocated by the National Petroleum Policy, are critical to reducing the naira’s vulnerability to oil price volatility. For now, the Brent crude rally offers Nigeria a temporary buffer, but long-term stability hinges on addressing deeper economic challenges.
