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The Nigerian naira may get some respite from its recent persistent slide against the dollar as turmoil in the Middle East leads to a rally in global oil and gas prices.
Nigeria pumped 1.67 million barrels of oil and condensates per day in September, due to security improvements in the producing Niger-Delta region, Mele Kyari, head of the state-oil firm NNPC said last month.
Oil and natural-gas prices jumped after the surprise weekend attack on Israel by Hamas and the Israeli response risked stoking instability in the petroleum-rich Middle East.
Brent crude futures, the global benchmark, rose 4% toward $88 a barrel, while European natural-gas futures leaped 14% to more than 43 euros a megawatt-hour.
Israel ordered Chevron to shut down natural-gas production at one of the two major offshore platforms it operates as a safety precaution, further tightening supply as buyers in Europe become increasingly reliant on alternatives to Russian pipeline flows, especially during the winter heating season.
The prices gains came as Israel launched a powerful wave of attacks on Gaza in response to the biggest assault by Palestinian militants on the country in years.
Exports of oil and gas are responsible for 90% of dollar earnings by Nigeria. The naira was quoted at 1002 per dollar at the parallel market on Friday, according to black market street traders.
But it was 26% stronger at 745.19 naira/dollar in the official window, according to FMDQ, a Lagos-based platform where the currency is traded.
The gap between the official and parallel market rates “highlights the challenges in sustaining exchange-rate liberalisation and raises the possibility of a further devaluation,” ratings agency Fitch said in a note, last week.
Nigeria allowed its currency to weaken 40% against the dollar in June as part of reforms aimed at attracting foreign investment to help revive the struggling economy.
The West African nation was the seventh largest global Liquefied Natural Gas (LNG) exporter in 2022, with export of 14.7 million tons (MT), according to the IGU World LNG report.
Revenues earned by Nigeria from LNG sales declined by 11.6 per cent in the first quarter of the year to N622 billion ($830 million), according to data from the National Bureau of Statistics (NBS).
Between April and June 2023, Nigeria exported some 5.6 trillion naira of crude oil, roughly $7 billion. Europe and Asia are Nigeria’s main trade partners for crude oil exports.
Benchmark European gas futures rose as much as 7.3% to the highest since mid-June, after gaining 15% on Monday.