What Naira Decoupling Means for Nigeria’s Economy

Photo Illustration by Michael Emono / THE REPUBLIC. Source Ref: Akintunde Akinleye / REUTERS.

Nigerians have long endured several volatile macroeconomic environments since independence in 1960. From staggeringly rising exchange rates, alarming inflation levels, high unemployment, to an economy whose performance has been tethered to oil since its discovery in Oloibiri in 1956. We have grown so accustomed to several harsh episodes of volatility that any positive development in the economy sounds like propaganda met with public criticism, mockery, and mixed reactions. Thus, recent analysis on the naira’s upward trajectory was dismissed as unsustainable and premature.

On 8th July 2025, Anthony Osae-Brown, bureau chief at Bloomberg Africa, and Bloomberg analyst Emele Onu co-authored a viral article revealing a striking development in Nigeria’s currency markets. Little did they know their report would ignite a firestorm of debate. The article highlighted that, over the last four quarters, the naira’s movements seem increasingly independent of crude oil, a phenomenon now called naira decoupling.

As a resource-rich country, Nigeria’s currency performance has historically mirrored the movement of oil prices. When oil prices rise, Nigeria earns more dollars from crude sales, and the naira tends to strengthen. When oil prices fall, fewer dollars flow in, and the naira weakens. Evidence from the 2023 Central Bank of Nigeria (CBN) second-quarter report shows the relationship clearly. In Q2 2023, the average exchange rate of the naira to the dollar at the Nigerian Foreign Exchange Market (NFEM), previously the Investors & Exporters Window, depreciated by 9.8 per cent, from ₦460.93 to $1 in Q1 2023 to ₦511.23 in Q2 2023. During the same period, Brent crude averaged $79.78 per barrel, down from $83.86 in Q1 2023, showing the classic naira-oil correlation. The trend persisted in 2024. In Q2 2024, Brent crude traded between $86 and $90 per barrel while the naira fluctuated between ₦1,370 and ₦1,529 per dollar.