Crude Oil and the Nigeria Naira Exchange Rate

Abstract

The paper examined crude oil and the Nigeria naira exchange rate. Crude oil is a natural resource found beneath the water table usually in the delta region or in the sea and ocean. Oil as a hydrocarbon was first found and drilled in Oloibiri in Bayelsa State in 1956, and has become the basic source of Nigeria’s foreign earnings and therefore its foreign exchange. Exchange rate is the value of another country's currency compared to that of your own. But the ups and downs in the price of crude oil has put the Nigerian economy at the edge of the sword. Moreover, since the announced global slump in oil prices, governments at all levels (federal, state and local) have had hard times meeting their expenditure needs. Also, the weak value of the naira in relation to the US. Dollar has not help the country economy. This is because, while the stream of income remained the same, one now need more Naira to pay for some commodities abroad. Also, any drop in crude oil prices tends to lead to a weakened Naira against the dollar on the black market. Therefore, in order to have a chance at developing, a country needs to maintain a competitive exchange rate that is not overvalued.