The oil and gas sector’s demand for foreign exchange significantly increased in 2024, more than doubling its 2023 figures. This rise amounted to $1.23 billion (119 percent) year-on-year, despite reported decreases in fuel imports and ongoing efforts to boost domestic refining. This information comes from the Central Bank of Nigeria’s latest quarterly statistical bulletin.

A detailed look at the data shows that the sector used a total of $2.26 billion in foreign exchange in 2024, a substantial jump from the $1.03 billion recorded in 2023.

These figures highlight a considerable spike in foreign exchange requests. This occurred even as fuel import volumes were reportedly falling, a trend attributed to the gradual operation of the Dangote Refinery and the federal government’s initiative to reduce petroleum product imports.

However, a month-by-month analysis of the data revealed significant fluctuations in the sector’s demand throughout 2024. For instance, the year started with an unusually low utilization of $26.55 million in January. This marked a sharp 85 percent drop from the $173.88 million recorded in January 2023.

In February, demand rose steeply to $161.88m, up 509 per cent from January 2024, and also higher than the $137.67m used in February 2023. The upward trend continued into March, where utilisation peaked at $334.47m, representing a 107 per cent month-on-month increase from February, and a 120 per cent year-on-year increase from $151.75m in March 2023.

In April 2024, the amount fell to $106.48m, a 68 per cent decline from March and 19.6 per cent lower than April 2023, which recorded $132.36m.

Demand picked up again in May, rising to $150.45m—up 41.3 per cent from April, and 27.6 per cent higher than the $117.92m utilised in May 2023. A steep drop followed in June, with utilisation falling to $36.82m, representing a 75.5 per cent drop from May, and 59 per cent lower than June 2023’s $89.85m.

The second half of the year saw a sharp turnaround. In July 2024, the sector utilised $107.10m, more than doubling the $45.82m spent in July 2023.

August 2024 recorded $132.45m, in contrast to zero utilisation in August 2023. By September, the figure rose to $192.71m, up from $42.43m in the same month of the previous year, while October climbed slightly to $197.79m from $38.46m in October 2023.

In November, foreign exchange utilisation surged further to $289.21m, nearly six times higher than November 2023’s $51.95m. The most notable jump came in December 2024, when the oil sector recorded its highest monthly forex utilisation of $526.50m, an 82 per cent increase from November, and a tenfold rise compared to $52.14m spent in December 2023.

December alone accounted for 23.3 per cent of the sector’s total forex usage for the year. In total, the second half of 2024 (July to December) accounted for $1.45bn, representing 64 per cent of the sector’s annual total, and a 528 per cent increase compared to $230.8m recorded in the second half of 2023.

This surge occurred despite the introduction of the naira-for-crude oil policy aimed at easing pressure on the country’s foreign exchange reserves. The policy, which came into effect in October 2024, was designed to allow local refineries, particularly the Dangote Refinery, to purchase crude oil in naira rather than dollars.

Under the arrangement, the Nigerian National Petroleum Company Limited agreed to supply crude to domestic refiners in exchange for naira payments, a move seen as part of efforts to strengthen the local currency and reduce dependence on the dollar.

Speaking at the eighth edition of the Nigeria International Energy Summit, which opened in Abuja earlier this year, President Bola Tinubu said the introduction of the sale of crude oil in Naira was a strategic move to enhance the operational efficiency of local refineries by reducing foreign exchange risks and transaction costs.

However, the policy has faced implementation setbacks, and its impact appears limited in curbing forex demand from the oil sector. In March 2025, the Dangote Refinery reportedly suspended naira-denominated fuel sales, citing challenges related to dollar obligations for crude oil procurement.

This temporary suspension raised concerns about the feasibility of the initiative and may have led to a resurgence in dollar-based transactions across the sector. Market watchers had said that the stalled talks over the naira-for-crude deal between the NNPC and Dangote refineries could threaten liquidity in the foreign exchange market and affect the deceleration of inflation.

In April 2025, the Federal Government reaffirmed its commitment to the naira-for-crude policy, with directives issued for its full and indefinite implementation.

Decline In Oil Imports

Nigeria’s official oil imports fell by nearly a quarter in 2024, despite a sharp rise in foreign exchange utilisation by the oil sector during the same period, raising questions about the underlying drivers of dollar demand in the industry.

According to data from the CBN, oil imports, measured on a Cost, Insurance, and Freight basis, declined by 23.3 per cent to $14.75bn in 2024, down from $19.23bn recorded in 2023.

This is in contrast with foreign exchange utilisation by the oil sector, which surged by 119 per cent year-on-year, from $1.03bn in 2023 to $2.26bn in 2024. A closer examination of the monthly oil import data reveals a persistent decline across most months in 2024, with only a few periods of mild recovery.

In January 2024, oil imports stood at $1.38bn, down 40.7 per cent from $2.33bn in January 2023. February showed an uptick to $1.71bn, still short of the $1.87bn recorded in the same month of 2023.

The trend softened in March, with oil imports of $1.50bn, representing a 32.2 per cent year-on-year drop from $2.21bn in March 2023. The value of oil imports in April 2024 was $1.53bn, marginally below the $1.97bn posted in April 2023, while May 2024 recorded $1.59bn, which was lower than May 2023’s $1.63bn.

June witnessed a steep decline to $844.03m, a 3 per cent fall from the $870.18m recorded in June 2023, and the lowest monthly figure at that point in the year. The downward trajectory persisted in July, with oil imports dropping to $1.07bn compared to $1.22bn a year earlier.

In August, the country imported $1.59bn worth of oil, slightly below the $1.71bn recorded in August 2023. September 2024 marked one of the sharpest declines, with oil imports falling to $741.63m, down 51 per cent from $1.51bn in September 2023.

Though there was a modest rebound in October 2024 to $878.03m, this still fell short of $1.68bn in October 2023. November 2024 registered oil imports of $1.22bn, compared with $1.38bn in the same period the previous year.

The year ended on a particularly weak note, with December 2024 oil imports of just $683.97m, representing a 19.7 per cent drop from $851.43m in December 2023. Altogether, the oil import total for 2024 reached $14.75bn, down from $19.23bn in 2023, confirming a full-year contraction of $4.48bn or 23.3 per cent.

The decline aligns with policy direction to reduce petroleum product imports following the deregulation of petrol pricing and the phased operationalisation of the Dangote Refinery. However, the drop in oil import value did not translate to lower foreign exchange demand from the sector

Meanwhile, non-oil imports also declined, though at a slower pace. Non-oil imports fell from $30.81bn in 2023 to $26.98bn in 2024, representing a decline of 12.4 per cent. Similarly, Informal Cross-Border Trade dropped from $2.22bn to $1.98bn, a reduction of 11 per cent.

Overall, total imports (CIF basis) stood at $43.71bn in 2024, down from $52.27bn in 2023—a decline of $8.56bn or 16.4 per cent. On a Free on Board (FOB) basis, which excludes insurance and freight costs, oil imports also dropped by 23.2 per cent from $18.31bn in 2023 to $14.06bn in 2024.

This consistent pattern between CIF and FOB data confirms that the reduction in oil import value was not driven by lower shipping and insurance costs but by actual volume or value contraction.

FX Pressure

An oil and gas expert, Olatide Jeremiah, linked the persistent surge in dollar demand to the activities of the downstream petroleum sector, particularly the continued importation of refined products and crude oil by private refineries.

Speaking with our correspondent, Jeremiah said imported fuel still accounts for nearly half of Nigeria’s estimated 50 million litres daily fuel consumption. “The importation of refined products makes up about 50 per cent of daily consumption, and that’s a major source of FX pressure,” he noted.

He added that the Dangote Refinery, despite having a production capacity of between 350,000 and 450,000 barrels per day, receives less than 150,000 BPD from local suppliers under the CBN’s naira-for-crude policy.

As a result, the refinery supplements its feedstock by importing an average of four crude tanker vessels weekly, amounting to over 70 per cent of its total intake. Jeremiah warned that the rising reliance on imported crude, paid for in dollars, is exacerbating pressure on the naira.

“Imported crude is the only way to augment his production capacity, and it in turn weakens our naira and strengthens the dollar,” he said.

Credit: The Punch