Nigeria Swaps Dollar For Naira To Stabilise Petrol Prices

Nigeria’s $20 billion Dangote Refinery, Africa’s biggest refinery that opened earlier this year, is now using the national currency, the Naira, instead of the U.S. dollar to buy crude oil from the state oil corporation.  This move follows a July directive approving the Nigerian National Petroleum Corporation (NNPC) to sell oil to refineries using the Naira to reduce foreign exchange demand and help stabilise pump prices for Nigerian motorists.

Under the Naira-for-crude policy, Dangote Refinery would reciprocate by selling refined products to the NNPC in Naira. Aliko Dangote, Nigeria’s richest man, runs the Dangote Refinery, which can process 650,000 barrels a day.

The refinery was forced to import crude from international markets after international oil companies insisted on a premium rate above the market price. Dangote represents a threat to some of Europe’s largest refineries, like Shell and TotalEnergies, which have held Nigeria’s oil industry in a stranglehold.

Using Naira will cut Nigeria’s monthly petroleum bill from $660 million to $50 million, netting $7.32 billion in savings annually. Nigerian authorities expect that the significant reduction in dollar outflows will improve foreign exchange reserves and stabilise the Naira, which devalued twice over the last year. For decades, Nigeria’s lack of refining capacity has caused chronic fuel shortages, resulting in long queues at the pump. Let us know what you think in the comments.