Nigeria Shifts from US Dollar, Now Sells Crude Oil in Naira
In a bold move, Nigeria, Africa's leading oil producer, has decided to stop selling crude oil in US dollars and will now conduct transactions in its local currency, the naira. This strategic shift, approved by the Federal Executive Council (FEC), marks a significant departure from the country's long-standing reliance on foreign currency, particularly the dollar, in its oil trade.
According to Mohammed Manga, a spokesperson for the Ministry of Finance, this decision is aimed at fostering economic stability and growth in Nigeria. With around 37 billion barrels of oil reserves, accounting for 3.1% of global oil reserves, the timing of this change aligns with ongoing geopolitical tensions in the Middle East and the Russia-Ukraine conflict, which are affecting global energy markets.
Rising Crude Prices Amid Middle East Conflict
The conflict between Iran and Israel has led to a surge in oil prices. Nigeria’s Bonny Light crude has climbed from $73 per barrel to $78, while Brent crude, the international benchmark, now sits at $79 per barrel, a more than 10% increase. Iran, one of the world’s largest oil producers, has launched nearly 200 missiles into Israel, exacerbating the crisis and driving up oil prices.
Nigeria's 2024 budget, which was based on a $78 per barrel oil price, is now being met. If Nigeria can maintain its production targets, the higher crude prices could help reduce the country’s budget deficit. Dr. Abdulsalam Muhammad Kani, an economist, believes that sustained high prices and steady production could provide Nigeria with a rare opportunity to ease debt servicing and boost public project funding.
Kani also notes that the increased flow of dollars from oil sales could strengthen the naira, potentially lowering the cost of imported goods. "As we earn more dollars from oil, our currency may appreciate, making imports more affordable for Nigerians," he explained.
However, there’s more to the story.
Corruption and Oil Theft: Major Challenges Remain
Despite the rising oil prices, Nigeria’s oil sector is plagued by corruption and theft, which continue to undermine the potential benefits. Energy expert Engr. Sani Yabagi highlighted the rampant theft of crude oil, much of it carried out by well-connected individuals.
Yabagi emphasized that a significant portion of Nigeria’s oil revenue is lost to theft, preventing the country from fully capitalizing on higher global prices. Between August 24 and 30 alone, the Nigerian National Petroleum Corporation (NNPC) reported 188 incidents of oil theft in the Niger Delta region.
In addition, Nigeria’s oil revenue is further strained by the fact that the country imports most of its refined petroleum products. "We export crude oil and then import refined oil, so even when prices rise, we end up spending a significant portion of our earnings on imports," Yabagi noted.
Nigeria has taken steps toward refining its oil locally with the recent opening of the Dangote Refinery, but as a private venture, its impact on national revenue has been limited so far. Last week, the federal government began selling crude oil to Dangote and other local refineries in naira, solidifying the shift away from the US dollar. However, Yabagi warns that this alone won’t solve the deeper issues.
"To make a real difference in fuel prices, the government would need to sell crude to local refineries like Dangote at a discounted rate. Right now, Dangote still imports crude because the NNPC can’t meet all its needs," he explained.
With the Middle East crisis expected to drive energy costs even higher, Yabagi cautions that while short-term gains are possible, without proper management, Nigeria might not benefit as much as anticipated. "Rising energy costs could end up hurting Nigeria more than helping if corruption and reliance on imports aren’t addressed," he concluded.

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