A recent surprising increase in the value of the naira was attributed to a decrease in demand for the dollar. Consider the scenario where buyers of Nigeria’s petroleum are required to first acquire the naira before making payments to the Nigerian National Petroleum Company Limited.
Kenya’s President William Ruto questions the necessity of Africans buying goods in Djibouti and paying in dollars. He proposes using local currency for transactions in certain regions and is pleased with Afreximbank’s initiative supporting local currency settlements for intra-Africa trade.
In the past, Nigerian students often exchanged naira for CFA at the border with Benin Republic at Seme, illustrating the process of cross-border currency usage for transactions.
Similarly, Nigerian importers typically acquire dollars before conducting transactions. This practice led to the establishment of exchange rates. However, now, the Central Bank of Nigeria and correspondent banks manage currency exchange and payments.
Some may find the idea of buyers purchasing naira to buy Nigeria’s petroleum unconventional, especially those influenced by traditional West-centric economic theories.
Promoting export trade to address forex scarcity, as advocated by investment banker and Edo State Governor Godwin Obaseki, aligns with the principle of accumulating foreign reserves for imports funding.
The international trade dynamics shifted post-Second World War with the introduction of fiduciary currency, emphasizing America’s influence in global trade, particularly in petroleum transactions.
American strategies, including the association with the House of Saud for dollar-based petroleum trade, cemented its economic dominance in the global market.
The proposal to transact Nigeria’s petroleum sales in naira could potentially boost the currency’s value due to increased demand, following the basic economic principle of supply and demand.
However, irresponsible fiscal policies, like excessive currency printing, can negatively impact the naira’s value, undermining potential gains from such initiatives.
Requiring buyers to purchase naira before acquiring Nigeria’s resources can stimulate the currency’s value in international trade, if implemented effectively over time.
This unconventional policy may face opposition from Western powers, wary of potential disruptions to their economic interests.