By Adesina Quadri Ademola
The Federal Government’s decision to suspend the sale of crude oil to the Dangote Refinery under the Naira-for-crude policy has sparked concerns among oil marketers and industry stakeholders.
While the policy was introduced to strengthen the local currency and promote economic stability, its suspension presents both opportunities and challenges for Nigeria’s energy sector and economy.
One of the key benefits of the Naira-for-crude policy is its potential to reduce Nigeria’s dependence on foreign exchange for oil transactions. By selling crude in Naira instead of dollars, the government aimed to ease pressure on forex reserves and stabilize the local currency.
In an economy where forex scarcity often leads to inflation and a depreciating Naira, this initiative was a step toward financial resilience.
Additionally, prioritizing crude supply to local refineries like Dangote’s was expected to enhance domestic refining capacity, reducing the country’s reliance on costly fuel imports. Over time, this could have led to lower fuel prices, increased job opportunities, and a more self-sufficient energy sector.
The policy also aligned with Nigeria’s broader push for economic diversification and local industrial growth.
Despite its intended benefits, the suspension of the policy has raised fears of a potential increase in fuel prices.
If Dangote Refinery struggles to access crude oil domestically, it may have to purchase crude from the international market at dollar-denominated prices. This increased cost could then be transferred to consumers, leading to higher pump prices and inflationary pressures.
Furthermore, the suspension highlights a recurring issue in Nigeria’s economic landscape—policy inconsistency.
Frequent policy reversals create uncertainty for investors, both local and foreign, who require a stable regulatory environment for long-term investments.
If local refiners face uncertainties regarding crude supply, their ability to operate efficiently and competitively may be compromised.
Additionally, a shift back to exporting crude rather than refining it locally could mean Nigeria loses out on the economic benefits of value-added processing.
The long-standing practice of exporting crude oil only to import refined fuel has strained national resources, and reversing efforts to change this model could be detrimental in the long run.
To strike a balance, I urged the government to establish a clear and consistent policy framework that supports local refining without creating market distortions. If the Naira-for-crude policy is to continue, it should be accompanied by measures that guarantee a steady crude supply to local refiners at competitive rates.
Likewise, it will improve forex management strategies, which are essential to stabilizing the Naira without disrupting key industries.
Moreover, Nigeria’s oil and gas sector requires a well-structured approach that prioritizes economic stability, consumer welfare, and investor confidence. Whether through Naira-for-crude or alternative mechanisms, the government must ensure a policy framework that promotes local refining, guarantees affordable fuel prices, and fosters sustainable industrial growth.
