Nigeria Launches Oil-for-Naira Program to Boost Local Currency Amid Concerns

Nigeria has launched a new initiative aimed at stabilizing its weakening currency, the naira, by selling crude oil to Aliko Dangote’s newly opened refinery in naira. This “oil for naira” scheme officially began on October 1, 2024, and is designed to ease the pressure on the naira, which has lost significant value this year. However, the program’s success is uncertain, as reports of a dispute between the Dangote refinery and the Nigerian National Petroleum Company Limited (NNPC) raise concerns about its long-term effectiveness.

Efforts to Stabilize the Naira

The Nigerian National Petroleum Company Limited (NNPC) commenced the sale of 385,000 barrels of crude oil per day to Dangote’s refinery in naira. This plan, overseen by a technical committee chaired by Zacch Adedeji, Chairman of the Nigerian Federal Inland Revenue Service (FIRS), is expected to lead to the sale of petroleum products in the local currency. The hope is that this approach will alleviate the pressures on the naira, which has depreciated by over 60% in 2024.

The Central Bank of Nigeria (CBN) has struggled to stabilize the naira despite raising its benchmark interest rate and implementing measures such as restricting access to global cryptocurrency exchanges. Observers believe that the new “crude oil for naira” arrangement may finally offer some relief to the troubled currency.

Implementation Challenges

FIRS Chairman Adedeji outlined plans to ensure the scheme’s smooth execution, stating that a “one-stop shop” has been established to coordinate efforts among regulatory bodies, security agencies, and other stakeholders. He further explained that diesel produced by the Dangote refinery will be sold in naira to any interested buyer, while Premium Motor Spirit (PMS) will be sold exclusively to the NNPC, which will then distribute it to various fuel marketers.

“All associated regulatory costs, including charges from the Nigerian Ports Authority (NPA) and the Nigerian Maritime Administration and Safety Agency (NIMASA), will be paid in naira,” Adedeji said.

Uncertainty and Disputes

Despite the optimism surrounding the scheme, reports of a disagreement between the Dangote refinery, which began operations on September 15, and the NNPC have raised doubts about the program’s viability. The dispute has sparked concerns that the intended benefits, such as reducing fuel prices for Nigerians, may not materialize. Additionally, there are claims that the Nigerian Federal Government has so far refrained from intervening in the ongoing conflict, further dampening hopes for a swift resolution.

As Nigerians await the full rollout of the oil-for-naira scheme, many remain cautiously optimistic about its potential to ease inflation and improve the country’s economic standing.