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Naira-Dollar Dynamics in Petroleum Trade


The recent increase in the value of the Nigerian naira was attributed to a decrease in demand for the dollar, prompting discussions about the possibility of selling Nigeria's petroleum in naira. 

Kenyan President William Ruto has questioned the need for Africans to use dollars for transactions and proposed using local currencies for purchases made in Africa. 

He mentioned Afreximbank's initiative to facilitate trade in local currencies across the continent.

In the past, some Nigerians exchanged naira for CFA at the border with Benin Republic to make purchases there. 

Similarly, Nigerian importers often first buy dollars before making payments, a process managed by the Central Bank of Nigeria and correspondent banks.

Critics, influenced by traditional economic principles, may find the idea of selling Nigeria's petroleum in naira unconventional, citing the Central Bank of Nigeria Act's provisions regarding foreign reserves. 

However, promoting export trade to address forex scarcity, as advocated by figures like investment banker Godwin Obaseki, may inadvertently favor developed economies.

The global economic landscape shifted post-World War II, with the dollar replacing the gold standard, leading to its dominance in international trade. 

America's support for the dollar in petroleum transactions further solidified its economic influence.

While OPEC countries once considered diversifying currency options, such as creating a BRICS currency, the dollar's centrality in global trade remains strong. 

If Nigeria were to require naira for purchasing its resources, it could potentially boost the naira's value, adhering to the basic economic principle of supply and demand.

However, implementing such a policy would require careful management to avoid negative repercussions and potential resistance from Western powers.

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