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Crude Oil Swap May Have Kept Forex Low - Atiku’s Ally, Chidoka

Amid shortage of foreign exchange in Nigeria, a former Minister of Aviation, Osita Chidoka, has said that crude oil swap may have strengthen the naira against the dollar.

Chidoka, an ally of Atiku Abubakar, Peoples Democratic Party (PDP) flag bearer in the February 25, 2023 poll, stated this on Channels Television’s Sunrise Daily on Wednesday.

The PDP stalwart expressed support for petrol subsidy removal and the floating of the naira – both policies executed by the President Bola Tinubu administration – but said that the policies must be made in such a way that there won’t be “serious negative externalities” such as soaring food prices and transportation cost.

The ex-minister also said Tinubu, then candidate of the All Progressives Congress (APC), should have waited, constituted his cabinet, and consulted them before taking the two major decisions he took.

“The Federal Executive Council represents the 36 states. It represents diverse opinion. The President does not meet with the Permanent Secretaries but in the Federal Executive Council, maybe, we would have known that part of our foreign reserves is a $7.5bn debt from foreign banks,” Chidoka said.

“Maybe, we would have known that the amount of money we spend on bringing in crude kept the naira officially low because we were using crude oil swap to get it, that by allowing individuals to import oil, we are now looking at $20m cargo and you are seeing that each of them is in the market looking for dollars to import the fuel cargoes.

“So, at the time the cargo is arriving, they are already taking a decision to increase the price to meet the replacement cost. So, it may have been important for the President to listen to all the dynamics of all the agencies to understand that maybe, just maybe, we may continue to use the crude swap to buy the fuel to avoid a run on the dollar, knowing that we don’t have the dollar as at this time.

“I don’t think they knew that. I don’t think they knew the nature of our debt; that NNPC was owing $3bn to fuel importers as at the time they took over.

“So, if you look at the dynamics of decisions taken, you could see clearly that the government was not abreast of the situation, of the huge mismanagement of the predecessor’s government.”

Pressure On Forex

In June 2023 after the removal of petrol subsidy by the President, the Nigerian National Petroleum Company (NNPC) Limited announced that it has commenced the termination of Direct Sale Direct Purchase (DSDP) contracts which allow sales of crude oil to refiners who in turn supply NNPC with an equivalent worth of petroleum products.

The company said instead of crude oil swap contracts, it will now pay cash for petrol imports, adding that private companies have begun petrol importation.

With the removal of petrol subsidy, a litre of Premium Motor Spirit (PMS) known as petrol jumped from N184 to about N600, more than 200% hike, amid soaring food prices and rising cost of transportation.

The removal of petrol subsidy and forex unification also witnessed unprecedented demand for the dollar.

To address the forex shortage in the country with a dollar exchanging at over N900 to the naira, Acting CBN Governor, Folashodun Shonubi, on Monday, had said the apex bank would take certain steps in the next few days to improve the liquidity in the market.

With forex scarcity biting harder, some oil marketers have threatened to raise petrol price as the landing cost of petrol rises but the NNPC and the President said there was no plan for such.

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