The Executive Secretary of the Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), Olufemi Adewole, has raised concerns over the Naira-for-crude oil transaction framework, warning that it could pose significant risks to Nigeria’s foreign exchange (FX) stability and discourage Foreign Direct Investment (FDI).
Adewole highlighted that such a policy might create volatility in the forex market, undermining investor confidence and worsening the country’s economic challenges. According to him, the lack of a stable exchange rate framework could deter foreign investors who prioritize transparency and predictability in financial transactions.
Adewole highlighted concerns over the volatility of the Naira, emphasizing that crude oil transactions are traditionally carried out in U.S. 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 U.S. 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 recognize 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,” he said.
Adewole further warned that Naira-for-crude transactions could place an unsustainable burden on Nigeria’s foreign exchange reserves.
He argued that the Central Bank of Nigeria (CBN) 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 stabilize 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 proponents of the policy argue that Naira-for-crude transactions could enhance economic sovereignty and strengthen the local currency, Adewole emphasised that policy decisions must prioritise sustainable economic impact.