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The Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN) has voiced apprehension regarding the possible dangers associated with the Naira-for-crude oil policy.
The association cautioned that the policy could threaten Nigeria’s foreign exchange stability and deter Foreign Direct Investment (FDI) inflows.
Olufemi Adewole, Executive Secretary of DAPPMAN, expressed these concerns in a statement issued on Monday in Lagos.
Adewole noted that the policy could disrupt Nigeria’s position in the global oil market, which has traditionally operated with transactions conducted in U.S. dollars.
He emphasised that oil trade is heavily reliant on the dollar due to its stability and worldwide acceptance, which ensures predictability for international investors and business partners.
By deviating from this global standard, Adewole warned that Nigeria risks isolating itself from international markets, obstructing trade, and discouraging investment.
“The international oil market is built on the dollar’s stability. Departing from this established norm could alienate our trade partners and deter investors,” he explained.
Adewole also pointed out broader economic concerns, stating that reactive policies often result in unequal advantages, benefitting a select few rather than the entire economy.
He cautioned that denominating crude oil transactions in Naira could lead to higher inflation and increased exchange rate volatility.
“The Naira has historically been unstable. Pegging oil transactions to it could provoke capital flight and discourage foreign investors,” he added.
Furthermore, Adewole warned that the Naira-for-crude framework could place significant pressure on Nigeria’s foreign exchange reserves.
Without adequate dollar inflows from oil sales, he explained, the Central Bank of Nigeria (CBN) might struggle to maintain currency stability.
“This policy could drain foreign reserves, leaving the CBN unable to defend the Naira. Oil sales are a key source of foreign exchange for Nigeria,” he stated.
While some argue that the policy could strengthen the Naira and enhance economic sovereignty, Adewole underscored the necessity of sustainable, long-term economic strategies.
“DAPPMAN supports measures aimed at bolstering the Naira, but reforms should tackle the root causes of its fragility,” he said.
He referenced Venezuela’s failed attempt in the 2000s to replace the U.S. dollar with its local currency for oil trade, which led to severe economic hardship.
Adewole urged Nigeria to learn from such historical missteps, cautioning that abrupt policy shifts without adequate safeguards could trigger unintended consequences.
“Disrupting global trade conventions can have serious repercussions. Policies should be designed to optimise benefits for all Nigerians,” he advised.
Despite these concerns, DAPPMAN remains committed to collaborating with regulators and stakeholders to improve Nigeria’s downstream oil sector.
Adewole stressed the importance of aligning with global market standards to ensure long-term economic resilience.
“The future of the oil industry depends on policies that attract investment, safeguard foreign reserves, and enhance competitiveness.
“With the right regulatory framework, Nigeria can build a resilient and sustainable energy sector,” he concluded.
