The damping of Naira continues to shake up the economic landscape of Nigeria, which has an impact on various sectors, including oil trade. Nigeria, the largest oil producer in Africa, found himself at the center of the current global debate on dedensation, in particular within the BRICS coalition. Despite an earlier interest in joining BRICS and to support transactions in local currencies, Nigeria is now resistant to the push To set oil payments in something other than the US dollar.
Nigeria oil trade and the Naira-For-Crude framework
In order to strengthen Naira and reduce dependence on foreign currencies, the Nigerian government has introduced a Naira-For-Crude transaction framework. However, this decision met with strong opposition from the main stakeholders in the petroleum sector. According to Olufi Adewole, executive secretary of the Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), the regulation of oil transactions in Naira could destabilize the exchange market and dissuade direct foreign investments (FDI).
“The Naira-Pour-Crude oil transaction framework presents significant risks that could affect Nigeria foreign exchange stability and dissuade foreign direct investments. The world oil market operates in US dollars because of its stability “,” Adewole said.
This feeling echoes the wider challenges faced by the BRICS to put pressure for the denollarization. Even Saudi Arabia, which had previously expressed its opening to accept local currencies for petroleum payments, continues to lead most of the US dollars transactions.
How Naira’s depreciation fuels this dead end
Union of traders Maintains that the volatility of Naira makes it an unattractive option for international trade, especially in the energy sector, where stability is crucial. In the past year, the Nigeria currency has undergone significant losses, resulting in an increase in import costs, inflation and economic uncertainty. If oil marketing specialists accepted Naira for raw exports, they would be exposed to high risks of depreciation in currencies, which makes transactions unpredictable and costly.
In addition, Nigeria’s dependence on oil revenues means that any policy affecting the oil trade has direct consequences on government benefits. With the Naira weakening against the dollar, Accept local currency payments Because crude would more affect foreign reserves, which makes it difficult for the country to comply with external obligations.
BRICS loss agenda: a difficult sale for Nigeria
Despite the push of the BRICS to challenge the domination of the US dollar, Nigeria is now aligning with other developing countries which consider denollarization as a risky enterprise. The country’s economic stability remains closely linked to the dollar, which makes it difficult to adopt the vision of the BRICS to negotiate oil in local currencies.
While Brics has made progress in reducing dependence on a dollar, its oil trade policies have not yet been widely accepted. Nigeria’s reluctance to exchange oil in Naira highlights the practical challenges of denollarization – without a stable alternative, the greenback remains king in the world oil markets.
Conclusion
Naira’s damping is a key factor in the rejection by Nigeria of local oil trade. The risks of monetary instability, inflation and drop in IED prevail over the potential advantages of the denollarization. While the BRICS continues to challenge the domination of the dollar, the Nigeria’s position indicates that the transition to local currencies in the world oil markets can take more time than expected. For the moment, the US dollar remains the favorite support for the oil trade, strengthening its bastion on international finances.
