Oil Marketers Warn Against Naira-for-Crude Policy Amid Forex Concerns
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The Federal Government’s decision to sell crude oil in naira to Dangote Petroleum Refinery has drawn sharp criticism from oil marketers, who warn that the move could destabilise Nigeria’s foreign exchange market and deter foreign investment.
Executive Secretary of the Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), Olufemi Adewole, issued a strong rebuke on Monday, cautioning that the policy risks isolating Nigeria from global trade and further weakening the economy.
“The naira-for-crude oil transaction framework presents significant risks that could affect Nigeria’s foreign exchange stability and deter foreign direct investment,” Adewole stated.
His comments come as Dangote Refinery suspended sales of petrol in naira, citing the Federal Government’s alleged refusal to continue supplying crude oil under the arrangement.
Currency Volatility and Investor Concerns
Adewole stressed that crude oil is traditionally traded in US dollars due to its global acceptability and stability. Moving away from this international standard, he warned, could alienate trade partners and discourage investors.
“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 said.
Citing the historical volatility of the naira, Adewole argued that anchoring crude transactions to the local currency could exacerbate inflation, capital flight, 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,” he cautioned.
He also warned that the policy could further strain Nigeria’s foreign exchange reserves, making it harder for the Central Bank of Nigeria (CBN) to stabilise the naira.
“It is almost inevitable that implementing this policy could further deplete Nigeria’s foreign exchange reserves,” he said. “Given that oil transactions have historically been a primary source of foreign exchange, disrupting this mechanism will likely intensify economic pressures.”
Lessons from Venezuela and Calls for Policy Rethink
While the Federal Government has argued that naira-for-crude transactions could boost economic sovereignty and strengthen the local currency, Adewole disagreed, urging policymakers to prioritise long-term economic sustainability over short-term interventions.
“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,” he said.
Adewole pointed to Venezuela’s failed attempt in the early 2000s to replace the US dollar with its local currency for oil transactions, which contributed to the country’s severe economic downturn.
“Nigeria needs to tread cautiously and learn from historical precedents,” he warned. “Policies that disrupt established international trade norms without adequate safeguards can have unintended consequences.”
DAPPMAN reaffirmed its commitment to working with regulators and industry stakeholders to promote efficiency and sustainability in the downstream sector.
“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,” Adewole concluded.
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