Oramah’s Naira-for-crude idea pushes Nigeria’s reserves to $42bn six-year high
Benedict Oramah’s Naira-for-crude idea has pushed Nigeria’s external reserves to a six-year high of $42 billion dollars, marking one of the most transformative economic interventions in recent years.
The initiative, conceptualised by Oramah, the outgoing president of the African Export-Import Bank (Afreximbank), has been hailed as a landmark innovation in economic management and local currency stabilisation.
Eric Intong, acting managing director of client relations at Afreximbank, disclosed this while speaking on the “Innovative Naira-for-Crude Initiative” at the Afreximbank Legacy Conference and Investiture in Cairo. He said the initiative reflects the vision and practical solutions for which Oramah and Afreximbank have become known across Africa.
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“We have done so many initiatives, and some of us have had the privilege to work directly with Professor Benedict Oramah, or as I always call him, President,” Intong said. “We chose to highlight one of those initiatives to bring to the fore the kind of intervention for which the bank was set up.”
Intong explained that the Naira-for-Crude initiative was born out of a need to address the pressure on Nigeria’s foreign reserves and the rising inflation caused by the importation of petroleum products. He said over 30 African countries depend heavily on imports and commodity exports, which make up about 80 percent of their foreign exchange earnings, exposing them to global commodity shocks.
“In 2024, when we made this proposal to the Federal Government, about one-third of Nigeria’s foreign reserves was being used to import petroleum products. This put enormous pressure on the Central Bank’s reserves, with inflation at over 34 percent and the cost of living extremely high,” he recalled. “Fuel queues were long, and as the regional chief operating officer in Abuja at the time, I often stayed up at night issuing trading letters to ensure fuel availability. It was very challenging.”
He said Oramah examined the problem and saw a solution within the Petroleum Industry Act (PIA) of 2022, which provided that 445,000 barrels of crude oil produced by Nigeria be reserved for domestic consumption. Oramah questioned why crude meant for domestic use was sold in dollars and the refined products also bought in dollars. Since both were domestic transactions, he proposed that they be traded in Naira, thereby saving scarce foreign exchange and strengthening the local currency.
Afreximbank, working with the Ministry of Finance and the Federal Inland Revenue Service, presented the idea to President Bola Tinubu, who embraced it and secured the Federal Executive Council’s approval on July 29, 2024. An implementation committee was immediately set up, with membership drawn from Afreximbank, NNPC, the Central Bank of Nigeria, refineries including Dangote Refinery and Warri Refinery, and other modular refineries, under the chairmanship of the Minister of Finance and Coordinating Minister of the Economy, Wale Edun. A sub-technical committee was chaired by FIRS chairman and presidential adviser on revenue mobilisation, Zacch Adedeji.
Afreximbank was appointed as the structuring and advising bank, with the additional role of setting the exchange rate for the initiative. Since both crude and refined products were to be traded in Naira, the bank was mandated to fix a stable rate, at least for three months, to ensure predictability. “President Oramah gave me the mandate to represent the bank in the committee,” Intong said.
The committee worked out the operational framework, signed the implementation modalities, and began allocating crude to refineries in Naira. “We discovered that when one allocates one million barrels of crude, it does not yield an equal quantity of refined petroleum products. You get about 50 percent Premium Motor Spirit, about 30 percent diesel, and others. Therefore, to get the value equivalent of PMS in crude, you need to allocate about twice the amount. These were some of the nuances and logistical challenges we addressed,” he explained.
Since the launch of the initiative, 59 cargoes of crude have been allocated, leading to a $6.8 dollar balance of payment surplus in 2024. Nigeria’s external reserves rose to forty-two billion dollars, the highest level in six years, while petroleum importation dropped by 40 percent as more refined products became available domestically. The average importation cycle for petroleum products, which used to take about three weeks, was reduced to two, while petrol prices dropped to as low as N800 per litre. Inflation, previously above 34 percent, fell to about 18 percent.
“This initiative was not designed for profit. Afreximbank did 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 Oramah grew the balance sheet of the bank to its current level, he made it possible for us to undertake initiatives like this. For us, banking is just an instrument; our true mission is development,” Intong said.
He also highlighted another of Oramah’s creative concepts, the National Export Revenue Acceleration Facility, designed to fast-track projects capable of generating foreign exchange within three years. “The idea is that if there is a project that will generate foreign exchange after completion in three years, why not find a way to complete it now so that it starts generating foreign exchange immediately? That is what the initiative is all about, and it is another example of his creative thinking,” Intong said.
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He added that the success of the Naira-for-Crude initiative was made possible because of the completion of the Dangote Refinery. Working with the Central Bank of Nigeria and Access Bank, Afreximbank structured a three-phase financing arrangement that enabled the refinery’s completion. “At that time, the Gulf of Guinea produced more than five million barrels of crude per day, but less than five percent was refined locally. We exported crude and imported refined products at great cost. Because of the National Export Revenue Acceleration Facility, we not only provided financing but also helped ensure the refinery could begin operations,” he said.
Intong concluded that the initiative demonstrates the importance of strong African financial institutions capable of driving development. “President Oramah built Afreximbank into such an institution. He is a leader who leads by example, one who rolls up his sleeves, works through the night, and ensures things get done. I remember many nights of meetings and email exchanges at 2am or 3am. That is the leadership we are celebrating today,” he said.
