Otunuga: Rising Oil Prices to Drive Currency Gains for Nigeria

Stories by Nume Ekeghe

Head of Market Research, FXTM, Mr. Lukman Otunuga, has said that sustained improvements in global crude oil prices are expected to translate into currency gains for Nigeria, given the country’s dependence on oil export revenues.

Otunuga noted that higher oil prices typically boost Nigeria’s foreign exchange inflows, strengthening external reserves and supporting the stability of the naira.

In a statement, he added the that as crude oil remains Nigeria’s dominant export, increased earnings from the sector would enhance liquidity in the foreign exchange market, helping to ease pressure on the domestic currency.

He said: “Rising concerns over supply shocks as the Strait of Hormuz remained effectively closed elevated oil benchmarks to triple digits. Given the ongoing conflict, oil prices remain fundamentally bullish with $100 a key psychological level for both Brent and Crude. This is good news for Nigeria who is a net oil exporter. Higher oil prices should translate to currency gains, though global risk-off from the Iran conflict may offset some upside.

However, he stressed that the full benefits of higher prices would depend on Nigeria’s ability to ramp up production and curb losses, noting that price gains alone may not yield optimal results without improved output.

Providing further insight into recent market trends, Otunuga added: “Looking at the charts, $4600 remains a key point of interest for gold with a break above opening the doors toward $4700/$4800 and weakness below this level inviting bears to target $4450 and $4300.Last Friday, USDJPY crossed above 160 for the first time since July 2024.

“Back in 2024, this level was defended twice by the Japanese government. If history repeats itself and an intervention becomes reality, this could trigger an aggressive selloff on the USDJPY pair. The Iran conflict may fuel risk aversion, stimulating appetite for safe-haven assets like the Yen.  Oil price volatility may also impact the Yen given that Japan imports 90 per cent of its crude from the Middle East.”