What Is the Terms of Trade Explained
16 October 2026 - Naira BriefingThe terms of trade is the ratio of what a country earns for its exports to what it pays for imports. For oil-dependent Nigeria it swings with the crude price, and those swings feed straight into the exchange rate.
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How it works
- Export prices up — especially oil, improves the terms of trade.
- Import prices up — worsens it, costing more dollars.
- The balance — shapes how many dollars the country nets.
Why it matters for the naira
When oil is high, Nigeria’s terms of trade improve and the naira has support; when it falls, the opposite — the same mechanism as oil and the naira. Diversifying exports steadies it, which is why the commodities cluster matters.
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