September 15, (THEWILL) – Nigeria, a giant nation in Africa and a major oil producing nation has engaged in a business aberration for decades – she sells her crude oil, her major source of revenue to the world in US dollar. This practice, they say, is in line with the global norm where the dollar serves as the dominant currency for international trade – a western neoclassical and monopolistic agenda promulgated to control the economy of the third world.
Meanwhile, as a business entity within the Nigerian Federation, the Dangote group, citing extant laws that prohibit the conduct of internal businesses in currencies other than naira, would not accept to buy Nigeria crude in dollar as the Nigerian National Petroleum Corporation Ltd (NNPCL) wanted. Hence, the yet-to-be rested furore between Aliko Dangote and the Nigeria National Petroleum Company Limited (NNPCL). To stop this feud, President Bola Tinubu created the naira-for-crude policy for Dangote Refinery’s transaction with the NNPCL.
The naira-for-crude policy states that Nigeria should instead sell its crude oil in naira, demanding payment in the local currency from buyers as well. The objective of this policy is to reduce Nigeria’s dependency on the dollar which will in turn strengthen the naira and promote its use within the domestic and international markets.
According to the International Monetary Fund (IMF), as of 2023, the dollar accounts for approximately 59 per cent of global foreign exchange reserves and around 88 per cent of all foreign exchange transactions. This dollar-centric model has entrenched the US currency as the de facto standard for international trade in many countries, including Nigeria.
In Nigeria, the implications of this dollar dominance are seen in different ways, impacting Nigeria’s economy. The first and main impact can be seen in Nigeria’s oil revenue, which has a significant portion of its foreign exchange earnings and is always influenced by the fluctuations in the dollar’s value. Nigeria’s revenue dependence on the dollar has created vulnerabilities, as any depreciation in the dollar impacts the value of Nigeria’s oil revenues and the prices of all essential commodities, thereby affecting the country’s economic stability.
Recent data shows the scale at which Nigeria’s economy depends on the US dollar. According to the Central Bank of Nigeria (CBN), the country’s foreign reserves, as of mid-2024, were approximately $33 billion, with the majority held in dollar. In contrast, the naira’s exchange rate has faced persistent pressure, with the naira trading at around N1,660 to $1 in the parallel market. A country like Russia has attempted a similar strategy like this by promoting the usage of the ruble in international transactions to reduce reliance on the dollar and it has achieved a level of success.
It is my patriotic opinion that utilising the naira for crude oil transactions will enhance Nigeria’s economic sovereignty. It would signal a move towards greater control over economic transactions and reduce reliance on external currency systems. The policy will strengthen the naira and increase its value. Increased demand for the naira in international oil transactions would support its exchange rate and might help stabilise or even appreciate its value over time.
Corroborating the aforementioned, Aliko Dangote, in a recent interview with Arise TV, stated that the Naira-for-Crude policy will reduce the demand for the US dollar by 40 per cent, giving stability to naira. This policy could also help reduce Nigeria’s dependency on the US dollar, leading to a more balanced foreign exchange reserve. By promoting the naira as a transactional currency, it is possible to reduce its exposure to dollar fluctuations and the associated economic risks that are associated with trading in dollars. The policy will in turn promote a better usage of the naira in other sectors of the economy, creating a more robust domestic financial system.
This shift will reflect in local businesses and encourage foreign investors to engage more with Nigeria’s economy in naira terms which will boost Nigeria’s revenue. This will also make it possible to compute and track the true national consumption of fuel in Nigeria and improve data collection.
Implementing this and achieving a naira-centric economy might be a hassle in the beginning due to the naira’s volatility but to ensure a flawless economic growth with the new naira-for-crude policy, President Tinubu needs to implement comprehensive economic reforms. Strengthening the naira’s value involves not just policy changes but also improvements in fiscal discipline, monetary policies, and overall economic governance. By shifting oil transactions from dollar to naira, Nigeria could potentially enhance its economic sovereignty, stabilize the naira, and promote a more resilient local economy. As Nigeria celebrates this new policy that promotes the nation’s growth, it is important to implement supportive economic reforms. The naira-for-crude initiative, if courageously executed, could indeed become a game changer, paving the way for a more self-reliant and robust Nigerian economy.
In conclusion, President Tinubu should order that all foreign missions and diplomatic operations within Nigeria should transact exclusively in naira. This could be a significant step towards reinforcing the local currency. It is an aberration to charge the Nigerian currency in dollar or pound sterling for the UK visa application within Nigeria.
All foreign and diplomatic missions in Nigeria should open a naira account for their operations. The Nigerian High Commission in the United Kingdom and the United States of America use Pounds Sterling and Dollars for their operations, not naira. Thus, all diplomatic missions should transact their businesses in naira within Nigeria. And by shifting oil transactions from dollars to naira, Nigeria could potentially enhance its economic sovereignty, stabilize the naira, and promote a more resilient local economy.
***written by Maxwell Adeleye
•Adeleye is a United Kingdom-based strategic communications expert and real estate broker.
