This week, oil prices experienced a significant dip, with Brent crude falling 3.8%, marking its steepest weekly drop since mid-November 2024. Meanwhile, WTI prices dropped 3.6%, marking the worst performance since late January. This downturn occurred as U.S. crude inventories swelled, and OPEC+ announced plans to hike output quotas, sending Brent prices to their lowest levels since December 2021.
Thank you for reading this post, don't forget to subscribe!Nigeria’s Bonny Light crude also felt the market turbulence, shedding 3.02% week-on-week to settle at $75.88 per barrel. The dip was attributed to weak global demand and shifting market dynamics. The price slump is also influencing Nigeria’s external reserves, which saw a marginal 0.61% decline to $38.49 billion as of March 5, 2025.
Economists have expressed concerns over the decline in oil prices, noting that it could further strain Nigeria’s economy. “The drop in oil prices is concerning, especially given that oil remains a significant source of revenue for Nigeria,” said Dr. Chuka Okafor, an economist specializing in African economies. “This could exacerbate the pressure on Nigeria’s external reserves and put additional strain on the naira.”
In the foreign exchange market, the naira faced slight pressure against the U.S. dollar, depreciating 0.01% week-on-week to N1,517.24 per dollar at the official window. The parallel market mirrored this trend, with the naira easing 0.02% to an average of N1,520 per dollar, reflecting a gradual uptick in demand for the greenback. “The depreciation of the naira is a reflection of broader economic conditions, including lower oil revenues and persistent demand for dollars,” said Dr. Sarah Ige, a currency strategist at the Nigerian Economic Research Institute.
Looking ahead, all eyes are on the Central Bank of Nigeria (CBN) as it continues its weekly interventions in the FX market to support the naira. “The CBN’s interventions will be crucial in stabilizing the naira in the short term,” Dr. Ige added. “While it’s possible that these efforts will provide temporary relief, sustained improvements in Nigeria’s foreign exchange reserves and oil revenue will be needed to ensure longer-term stability.”
The short-term outlook remains uncertain, with economists predicting a continued moderate market performance. However, an improved supply of dollars, driven by factors such as higher oil prices or greater foreign investments, could provide some relief for the local currency. “A rise in oil prices or a boost in external inflows could help stabilize the naira, but much depends on global economic conditions and Nigeria’s fiscal policies,” noted Dr. Okafor.
In conclusion, while the drop in oil prices and the naira’s slight depreciation reflect broader economic pressures, economists remain hopeful that the Central Bank’s interventions and potential improvements in global demand could help mitigate these challenges for Nigeria’s economy.
