Forex scarcity: Agora Policy urges FG to stop domestic crude oil allocation

Agora Policy, a think tank organisation, has urged the federal government to discontinue the allocation of the federal share of crude oil for domestic consumption to tackle the lingering forex crisis in the country.

A maiden report released recently titled ‘Cancelling Domestic Crude Oil Allocation is Nigeria’s Surest Path to Easing Forex Supply Crunch’ noted that of all the options being implemented or considered for boosting forex inflow into Nigeria, cancelling what is termed Domestic Crude Allocation (DCA) is the country’s best option.

Agora Policy noted that both the official and the unofficial forex markets are afflicted by what is basically a liquidity and flow challenge.

Part of the report reads: “Despite supportive oil prices, there is limited discussion around boosting organic forex flows from Nigeria’s oil exports.

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“Beyond improving security in the Niger Delta to curtail oil theft and re-engaging with capable partners to raise investments in oil production in the country, a short-term and sustainable fix for oil revenue and ultimately for increased forex flows will be for the Nigerian government to immediately cancel the policy of earmarking for domestic consumption a portion (and increasingly all) of its own share of oil output,” the think tank said.

“Any serious attempt at understanding and reforming how Nigeria’s share of oil is accounted and paid for must, for a number of reasons, zero in on the management of and the recent prominence of the DCA,” it added.

The report also said the allocated barrels of crude oil return first as petrol, then, in terms of monetary flow, as Naira, not dollars.

“This is because the resultant petrol from DCA is paid for in Naira, not dollars. It is worth highlighting that there is no guarantee that the Naira payment from DCA would translate to commensurate, or even any, revenue to the federation account. This is because the national oil company has always been in the habit of making upfront deductions for sundry reasons from revenue accruing from the DCA,” it further stated.

It concluded that “Cancelling the DCA is the easiest and most predictable way to boost forex flows into Nigeria and the most realistic way to reduce pressure on and provide relief for the Naira.”