Benedict Orama's naira-for-crude idea has boosted Nigeria's external reserves to a six-year high of $42 billion, one of the most transformative economic interventions in recent years.
Conceived by Orma, the outgoing President of the African Export-Import Bank (Afreximbank), the initiative has been hailed as a landmark innovation in economic management and local currency stabilization.
Acting Managing Director of Client Relations at Afreximbank, Eric Intong, disclosed this while speaking on the “Innovative Naira-for-Crude Initiative” at the Afreximbank Legacy Conference and Investiture in Cairo. He said this initiative reflects the vision and practical solutions that Oramah and Afreximbank are known for across Africa.
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“We have a lot of initiatives, and some of us have had the privilege of working directly with Professor Benedict Ormah, or as I always call him, the President,” Intong said. “We decided to highlight one of those initiatives to bring forward the kind of intervention for which the bank was established.”
Intong explained that the naira-for-crude initiative was born out of the need to address pressure on Nigeria's foreign reserves and rising inflation caused by the importation of petroleum products. He said more than 30 African countries are heavily dependent on imports and commodity exports, accounting for about 80 percent of their foreign exchange earnings, making them vulnerable to global commodity shocks.
He recalled, “In 2024, when we made this proposal to the Federal Government, about one-third of Nigeria's foreign reserves were being used to import petroleum products. This put huge pressure on the Central Bank's reserves, inflation was over 34 percent and the cost of living was very high.” “Fuel queues were long, and as the regional chief operating officer in Abuja at the time, I would often stay up at night issuing trade letters to ensure fuel availability. It was very challenging.”
He said ORAMA examined the problem and saw a solution under the Petroleum Industry Act (PIA) of 2022, which provided that 445,000 barrels of crude oil produced by Nigeria would be reserved for domestic consumption. Orma raised the question why crude oil for domestic use is sold in dollars and refined products are also bought in dollars. Since both were domestic transactions, he proposed that they be traded in Naira, which would save scarce foreign currency and strengthen the local currency.
Working with the Ministry of Finance and the Federal Inland Revenue Service, Afreximbank presented the idea to President Bola Tinubu, who adopted it and secured the approval of the Federal Executive Council on July 29, 2024. An implementation committee was immediately established, with membership from Afreximbank, NNPC, Central Bank of Nigeria, refineries including Dangote Refinery and Warri Refinery and other modular refineries. Chaired by the Coordinating Minister of Finance and Economy, Wale Edun. A sub-technical committee was chaired by the Chairman of FIRS and Adviser to the President on Revenue Mobilization, Jack Adedeji.
Afreximbank was appointed as the structuring and advising bank for the initiative, with the additional role of setting the exchange rate. Since both crude and refined products were to be traded in Naira, the bank was ordered to fix a stable rate for at least three months to ensure predictability. “President Orama has given me the authority to represent the bank on the committee,” Intong said.
The committee worked out the operational framework, signed the implementation modalities, and began the allocation of crude oil to refineries in Naira. “We found that when one allocates one million barrels of crude oil, it does not yield the same amount of refined petroleum products. You get about 50 per cent premium motor spirit, about 30 per cent diesel and so on. So, to get the equivalent value of PMS in crude oil, you need to allocate almost double the amount. These were some of the nuances and logistical challenges that we addressed,” he explained.
Since the launch of the initiative, 59 cargoes of crude oil have been allocated, leading to a payment surplus of $6.8 million in 2024. Nigeria's external reserves rose to forty-two billion dollars, the highest level in six years, while petroleum imports declined by 40 percent as more refined products became available domestically. The average import cycle for petroleum products, which used to take about three weeks, was reduced to two, while petrol prices fell to N800 per litre. Inflation, which was earlier above 34 percent, fell to about 18 percent.
“This initiative was not created for profit. AfreximBank does not earn any interest or fees from it. We intervened because the Bank was established to use banking as a tool for Africa's development. When President Orama increased the Bank's balance sheet to its current level, he made it possible for us to undertake such an initiative. For us, banking is just a means; our true mission is development,” Intong said.
He also highlighted another creative concept of ORAMA, the National Export Revenue Acceleration Facility, which is designed to fast-track projects capable of generating foreign exchange within three years. Intong said, “The idea is that if there is a project that will generate foreign exchange once completed in three years, why not find a way to complete it now so that it starts generating foreign exchange immediately? That is the whole purpose of this initiative and it is another example of their creative thinking.”
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He said the success of the Naira-for-Crude initiative was made possible by the completion of the Dangote Refinery. Working with the Central Bank of Nigeria and Access Bank, Afreximbank prepared a three-phase financing arrangement that enabled the completion of the refinery. “At the time, the Gulf of Guinea produced more than five million barrels of crude oil per day, but less than five percent was refined locally. We exported crude oil at great cost and imported refined products. Because of the National Export Revenue Acceleration Facility, we not only provided financing, but also helped ensure that the refinery could begin operations,” he said.
Intong concluded that this initiative reflects the importance of strong African financial institutions capable of driving development. “President Orama built Afreximbank into the institution it is. He is a leader who leads by example, who rolls up his sleeves, works through the night and makes sure things get done. I remember many late-night meetings and exchanging emails at 2 a.m. or 3 a.m. It is that leadership that we are celebrating today,” he said.
