Naira-for-Crude Deal Could Isolate Nigeria from Global Markets – Depot Owners
The Executive Secretary of the Depot and Petroleum Products Marketers Association of Nigeria, Olufemi Adewole has condemned the sale of crude oil in naira by the Federal Government to the Dangote Petroleum Refinery.
Adewole said, “The naira-for-crude oil transaction framework presents significant risks that could affect Nigeria’s foreign exchange stability and deter foreign direct investment.”
This is coming as the Dangote refinery suspended the sale of petrol in naira due to the Federal Government’s alleged refusal to sell more crude in naira to the facility.
In a statement on Monday, Adewole highlighted concerns over the volatility of the naira, emphasising that crude oil transactions were traditionally carried out in US dollars due to its stability and global acceptability.
He cautioned that failure to align with this international standard could isolate Nigeria from global markets, diminishing trade opportunities and discouraging investment inflows.
“The global oil market operates in US dollars due to its stability. Continuing the policy could alienate trade partners and investors who rely on the predictability of the dollar,” he stated.
Adewole stressed the need for policies that recognise the unique nature of the oil and gas sector to ensure sustained national competitiveness.
He noted that “reactionary policies often create skewed economic benefits that primarily favour select industry players rather than the broader economy.”
Citing the historical instability of the naira due to inflationary pressures and fluctuating exchange rates, Adewole asserted that tying crude oil transactions to the naira could exacerbate these challenges.
“The naira has experienced significant fluctuations over the years, driven by inflation and exchange rate instability. If crude oil transactions are linked to the naira, these issues will only worsen, potentially triggering capital flight and causing foreign investors to seek alternative markets. This would negatively impact Nigeria’s economic growth, the sustainability of the sector, and the efficiency of the oil and gas value chain,” the DAPPMAN boss argued.
He further warned that the naira-for-crude transactions could place an unsustainable burden on Nigeria’s foreign exchange reserves.
He stressed that the Central Bank of Nigeria might struggle to maintain currency stability amid insufficient dollar inflows, leading to additional economic strain.
“It is almost inevitable that implementing this policy could further deplete Nigeria’s foreign exchange reserves. The CBN may find it increasingly difficult to stabilise the naira due to inadequate dollar inflows. Given that oil transactions have historically been a primary source of foreign exchange, disrupting this mechanism will likely intensify economic pressures,” he explained.
While the Federal Government said last year that naira-for-crude transactions could enhance economic sovereignty and strengthen the local currency, Adewole disagreed, emphasising that policy decisions must prioritise sustainable economic impact.
“DAPPMAN supports all efforts and policies aimed at strengthening the naira. However, these strategies must be capable of driving major economic reforms that address the underlying causes of the naira’s weakness.
“Nigeria must strike a balance between national interests and global market realities. Economic policies are most effective when they are not shaped by sector-specific demands but rather by long-term economic sustainability,” he said.
The industry player referenced Venezuela’s unsuccessful attempt in the early 2000s to replace the US dollar with its local currency in oil transactions, which he said contributed to severe economic destabilisation.
“Nigeria needs to tread cautiously and learn from historical precedents. Policies that disrupt established international trade norms without adequate safeguards can have unintended consequences. We must ensure that our policies are designed to maximise benefits for all Nigerians,” he advised.
DAPPMAN, according to Adewole, remains committed to working with regulators and other stakeholders to promote efficiency and seamless access to “reliable, safe, and world-class solutions” in the downstream sector.
He reiterated the need for policies that align with international market realities while ensuring long-term economic stability for Nigeria.
“The future of Nigeria’s oil and gas sector depends on pragmatic policies that facilitate investment, encourage transparent competitiveness, and protect the nation’s foreign exchange reserves. By fostering an enabling environment for private-sector participation, Nigeria can achieve a sustainable energy landscape that benefits the economy,” he concluded.
