In a historic move, Nigeria, Africa's largest oil producer, has taken a game-changing decision—no longer selling its crude oil in US dollars. The Federal Executive Council (FEC) announced that the country will now sell its crude in naira, signaling a major shift in its economic strategy. For decades, Nigeria’s oil revenues have been tied to foreign currencies, especially the dollar, but that’s all about to change.
According to Mohammed Manga, a spokesperson for the Ministry of Finance, this decision is part of a broader plan to boost the stability and growth of Nigeria's economy. With approximately 37 billion barrels of oil in reserve—3.1% of the global total—Nigeria’s new strategy aligns with the current global geopolitical landscape, including tensions in the Middle East and the ongoing Russia-Ukraine conflict. This pivot could offer the country a chance to strengthen its economy while navigating an unpredictable global market.
Rising Oil Prices Amid Geopolitical Turmoil 🌍
As the conflict between Iran and Israel heats up, global oil prices are surging. Nigeria’s Bonny Light crude has risen from $73 to $78 per barrel, while the international benchmark, Brent crude, has jumped by over 10%, now sitting at $79 per barrel. With Iran, a major oil producer, involved in missile attacks on Israel, these rising prices are no surprise.
This comes as good news for Nigeria’s 2024 budget, which was set with a $78 per barrel benchmark. If production meets its targets, the country could narrow its budget deficit. Economist Dr. Abdulsalam Muhammad Kani points out that sustained high oil prices and stable production could help Nigeria ease its debt burden and fund essential public projects. Moreover, the boost in dollar revenue from oil exports might strengthen the naira and reduce the pressure on foreign exchange, lowering import costs—a critical factor for a country heavily dependent on imported goods.
Challenges Ahead: Corruption and Oil Theft Threaten Gains ⚠️
Despite these optimistic prospects, Nigeria faces internal hurdles that could undermine its oil profits. Corruption and large-scale oil theft continue to plague the industry. According to energy expert Engr. Sani Yabagi, much of Nigeria’s oil is being siphoned off by influential individuals, drastically reducing the nation’s earnings. In just one week, from August 24 to 30, the Nigerian National Petroleum Corporation (NNPC) reported 188 cases of oil theft in the Niger Delta region alone—a staggering number that highlights the gravity of the issue.
Compounding the problem is Nigeria’s reliance on imported refined petroleum products. While the country has recently made strides with the launch of the Dangote Refinery, refining oil locally is still in its infancy, and its impact on revenue is limited. The government’s recent move to sell crude oil in naira to local refineries, including Dangote, is a step in the right direction, but Yabagi warns that this alone won’t be enough to lower fuel costs unless crude is sold to these refineries at reduced prices.
As energy prices continue to soar due to the ongoing Middle East crisis, Nigeria stands at a crossroads. Without addressing the deep-rooted issues of oil theft and improving domestic refining capabilities, the country may not fully reap the benefits of this new economic strategy. While short-term gains are likely, long-term success depends on sound management and decisive action.