Recently, the Federal Executive Council (FEC) directed the full implementation of the Naira-for-Crude policy for local refiners.
The Naira-for-Crude policy, introduced in 2024, entails the sale of crude oil to domestic refineries– Dangote Refinery and others in naira instead of U.S. dollars.
FEC’s resolution on the policy was conveyed by Wale Edun, the Minister of Finance, who provided insights.
“Thus, the Crude and Refined Product Sales in Naira initiative is not a temporary or time-bound intervention, but a key policy directive designed to support sustainable local refining, bolster energy security, and reduce reliance on foreign exchange in the domestic petroleum market,” the minister said.
Policy analysts say the latest move, if expanded and enforced, could become a game-changer in the oil industry.
According to observers, under the policy, there will be no more half-in, half-out arrangements; no more allowing the naira to be treated like second-class tender in its own country.
It is worthy of recall that some stakeholders, have long before FEC’s directive, canvassed for full implementation of the policy.
Sen. Ned Nwoko (APC Delta-North) had been vocal in advocating the Naira-for-Crude policy and harped on the need to create consistent, structural demand for the naira.
Nwoko had always argued that the nation could not expect the naira to gain strength if its use was not prioritised in its own economy.
According to him, optimising the naira includes paying salaries, signing contracts, and of course, selling crude in naira.
Nwoko, who is the Senate Ad-hoc Committee Chairman on Crude Oil Theft, said there was need to replicate the policy across other sectors.
“We begin to build a currency that commands respect, not pity.
“More importantly, this is about economic dignity; Nigeria is the only country where foreign currencies are treated as the gold standard even within its own borders.
“Of course, this will not solve everything overnight; implementation will be key, and we have seen policies fizzle out before.
“But the tone has shifted; this is no longer a six-month experiment; this is national direction,’’ he said.
Though Nwoko’s advocacy was seen as idealistic in some quartres, he was relentless and pushed for a bill to ban the use of foreign currencies in domestic transactions, a controversial but necessary move.
His argument was that as long as landlords collected rent in dollars and expatriates got paid in pounds, the naira would continue to suffer in its own house.
In his appraisal, Mr Peter Esele, former President of the Trade Union Congress (TUC), said the new FEC’s directive was a welcome development.
According to Esele, also a former President of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), the directive is long overdue.
‘’It is just that most times in this part of the world, we just do things arbitrarily; so, as the saying goes, it is better late than never.’’
He said that the benefits of the Naira-for Crude scheme were enormous as the policy would strengthen the naira and help businesses to look for local currencies.
‘’It will strengthen our local currency; it will also help businesses to look for local currencies and not going about scampering for dollars, which is scarce.
‘’And one of the reasons why you have our currency moving from N1, 200 to N1, 300, and N1,700 at times going to almost N2,000 to the dollar is because of the demand,’’ he said.
The former labour union president added that Nigeria was the only country where certain commodities were priced in dollars.
‘’You do not go to America and then you are now pricing things in Euro; no, or you go to UK and you start pricing things in dollars.
‘’There are some real estates in Nigeria; all their prices are in dollars; it is not done anywhere.
“So, anything that is supposed to be purchased in Nigeria must be done in the local currency.
“And this is good for potential investors in refineries, knowing that they can get the crude oil supply in naira and they will not go scampering or looking for dollars; so, it is a win.
“It is beneficial to our economy and it is also beneficial to our national security.’’
Esele said that the impact of the new policy on petroleum product would however be negligible.
“Maybe two naira or three naira, but at the end of the day, it is not going to be as wide as we may think; this is because the government is selling the crude in naira; it is not selling outside of international crude oil price,’’ he said.
In the same vein, Mr Ifidon Coker, an economist, said that the Naira-for-Crude policy mainly aimed to reduce pressure on the foreign exchange market and strengthen the naira by allowing domestic buyers to pay for crude oil in the local currency (naira) instead of in U.S. dollars.
According to Coker, economically, it has some key economic benefits which include reducing demand for foreign exchange.
“Since crude oil transactions typically require dollars, insisting on naira payments lowers the demand for dollars, helping to stabilise and possibly strengthen the naira against other currencies.
“It will improve liquidity in the naira market by encouraging large oil sector transactions in naira; the policy increases naira liquidity within the economy, making more funds available for lending and investments.
“It will also boost local industries by ensuring that domestic refineries and oil marketers can now purchase crude in naira, reducing their exposure to exchange rate fluctuations and making it easier for them to plan and operate.
“This can help Nigeria move closer to energy self-sufficiency.”
He also said that the policy would enhance monetary policy control, as with less reliance on dollars, the Central Bank of Nigeria (CBN) could better manage inflation and other macroeconomic variables, as it reduced external shocks tied to foreign currency volatility.
“Encouragement of investment in the oil sector will bring about easier access to crude oil in local currency and encourage private investment in refining and related sectors, promoting industrialisation and job creation.
“This policy will also make for a reduction of capital flight; since transactions are done in naira, there is less incentive to move large sums of money abroad for oil trading, which can help in retaining capital within Nigeria.
“It will strengthen national economic sovereignty, because the policy will promote greater control over Nigeria’s strategic resource and reduces dependence on the dollar-dominated global oil market.
“The policy is indeed an excellent one that any good economist and concerned citizens would affirm and indeed align with.
“However, for these benefits to fully materialise, the policy must be implemented transparently, supported by adequate refining capacity, and backed by broader reforms in the oil and financial sectors,” he said.
Experts say the Naira-for-Crude policy is a laudable initiative that will lead to reduction in foreign exchange pressure, stabilisation of petroleum product prices, and in turn, a decline in food inflation.
