Olufemi Adewole, the Executive Secretary of the Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), warns that the Naira-for-crude oil transaction system carries consequential risks that could deter Nigeria’s foreign exchange stability and deter Foreign Direct Investment (FDI).

Adewole expressed concerns about the Naira’s instability, pointing out that crude oil deals are typically conducted in U.S. dollars because of their reliability and worldwide acceptance. He warned that not adhering to this global standard could cut Nigeria off from international markets, reducing trade prospects and deterring investment. “The global oil market functions in U.S. dollars due to its stability. Persisting with this policy could alienate trading partners and investors who depend on the dollar’s predictability,” he remarked.

Adewole highlighted the need for policies that recognize the unique features of the oil and gas industry to keep Nigeria competitive. He pointed out that reactive policies tend to create unequal economic benefits, favoring only a small number of players in the industry rather than supporting the broader economy.

Adewole pointed out that the Naira has a history of instability caused by inflation and changing exchange rates, suggesting that linking crude oil transactions to the Naira could worsen these issues. He noted, “The Naira has gone through many ups and downs over the years because of inflation and unstable exchange rates. If we tie crude oil deals to the Naira, these problems will likely get worse, which could lead to capital flight and make foreign investors look for other markets. This would harm Nigeria’s economic growth, the sector’s sustainability, and the overall efficiency of the oil and gas industry.” He also cautioned that using the Naira for crude oil transactions could put a heavy strain on Nigeria’s foreign exchange reserves.

Adewole argued that the Central Bank of Nigeria (CBN) might find it hard to keep the currency stable without enough dollar inflows, which would add more pressure to the economy. “It’s almost certain that this policy could further drain Nigeria’s foreign exchange reserves. The CBN may struggle more to stabilize the Naira due to a lack of dollar inflows. He explained that because oil transactions have historically been a major source of foreign exchange, any disruption to this process is likely to intensify economic difficulties.

Balancing Economic Sovereignty with Global Market Realities—While supporters of the Naira-for-Crude policy believe it could bolster economic sovereignty and fortify the local currency, Adewole stressed the importance of prioritizing sustainable economic outcomes in policy-making.

“DAPPMAN endorses all initiatives aimed at strengthening the Naira. However, these approaches must be capable of instigating significant economic reforms that tackle the root causes of the Naira’s depreciation. Nigeria must find a way to harmonize national interests with the realities of the global market. The most effective economic policies arise not from sector-specific pressures but from a commitment to long-term economic sustainability,” he stated.

Learning from Venezuela’s Experience—Adewole pointed to Venezuela’s failed effort in the early 2000s to substitute the U.S. dollar with its currency for oil transactions, which led to considerable economic turmoil. “Nigeria must proceed with caution and draw lessons from past experiences. Policies that disrupt established international trade practices without proper safeguards can lead to unforeseen repercussions. Our policies must be crafted to maximize benefits for all Nigerians,” he cautioned.

Collaborative Regulation for a Sustainable Energy Sector—According to Adewole, DAPPMAN is dedicated to collaborating with regulators and other stakeholders to enhance efficiency and ensure access to “reliable, safe, and world-class solutions” in the downstream sector. He reiterated the necessity for policies that are in sync with international market conditions while promoting long-term economic stability for Nigeria.

The trajectory of Nigeria’s oil and gas industry hinges on practical policies that attract investment, promote fair competition, and safeguard the country’s foreign exchange reserves. By creating a supportive atmosphere for private sector involvement, Nigeria can cultivate a sustainable energy framework that enhances economic growth, he concluded.