The Nigerian government announced in October last year that the country’s oil and gas firms would settle payments in local currency Naira and ditch the US dollar to advance the de-dollarization agenda. The government emphasized that the move would bolster their local currency usage on the global stage and give the nation’s GDP a boost in the arm. As the policy kicked-in, oil and gas firms are now reeling under losses as refiners are finding major mismatches in sales in naira and purchase of crude in the US dollars.

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The government’s Naira-for-crude oil transaction framework is being frowned upon by refiners as refiners’ balance sheets are printing losses. The move is destabilizing Nigeria’s oil and gas industry, which is the largest in the whole of Africa. The de-dollarization agenda is backfiring in Nigeria and oil and gas refiners now want the US dollar for trade settlements.

Just recently, Nigeria’s Dangote refinery announced that it is suspending sales in local currencies and will only accept the US dollar, challenging the government’s de-dollarization agenda. “To date, our sales of petroleum products in Naira have exceeded the value of Naira-denominated crude we have received. As a result, we must temporarily adjust our sales currency to align with our crude procurement currency” the statement read.

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De-Dollarization: Nigeria Expresses Regret For Ditching the US Dollar For Oil & Gas Payments

US dollar USD currency Africa Nigeria Naira
Source: Reuters

The oil and gas union head in Nigeria, Olufemi Adewole said that the government’s move is destabilizing the energy industry. “The naira-for-crude oil transaction framework presents significant risks that could affect Nigeria’s foreign exchange stability and deter foreign direct investment.” The de-dollarization agenda is not working in Nigeria as refiners now want the US dollar to thrive and survive.

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“The global oil market operates in US dollar due to its stability,” said Adewole. “Continuing the policy (Naira-for-crude) could alienate trade partners and investors who rely on the predictability of the dollar,” he stated. Many refiners in Nigeria could distance themselves from the government’s de-dollarization initiative and start accepting the US dollar for oil.

  • De-dollarization
  • Naira
  • Nigeria
  • Oil
  • oil and gas
  • US DOLLAR