The Nigerian oil and gas industry recorded a dramatic rise in foreign exchange usage in 2024, drawing over $2.26 billion from the nation’s reserves, an increase of 119% from the previous year, even as official fuel import volumes continued to decline.
This is according to the Central Bank of Nigeria’s (CBN) latest quarterly statistical bulletin, which paints a conflicting picture of falling import values and mounting forex outflows. In 2023, the sector utilised $1.03 billion in FX. Just a year later, that figure more than doubled, raising concerns about inefficiencies, loopholes, or shifting sourcing strategies within the petroleum supply chain.
High FX Spend Despite Import Drop
While the federal government had aimed to reduce reliance on imported fuels by boosting domestic refining capacity, particularly with the gradual startup of the Dangote Refinery, the data suggest otherwise. Oil imports, calculated on a Cost, Insurance, and Freight (CIF) basis, dropped from $19.23 billion in 2023 to $14.75 billion in 2024, a reduction of 23.3%.
But that decline in imports didn’t translate into lower foreign exchange usage by the industry. Instead, monthly forex demand showed erratic spikes throughout the year, with a massive surge in the second half.
Month-by-Month Breakdown
2024 began with an unusually low FX utilisation of just $26.55 million in January, down sharply from $173.88 million in the same month of 2023. February witnessed a major rebound to $161.88 million, which surged further to $334.47 million in March.
April saw a sharp pullback to $106.48 million, only for demand to rise again in May to $150.45 million. June slumped once more to $36.82 million, but from July onward, dollar usage soared.
In July, forex use stood at $107.10 million, well above the $45.82 million recorded in July 2023. The upward trajectory continued in August ($132.45 million), September ($192.71 million), and October ($197.79 million). November spiked to $289.21 million, culminating in an all-time high of $526.50 million in December. That final month alone accounted for nearly a quarter (23.3%) of the year’s total.
From July to December, the sector consumed $1.45 billion in FX, 64% of its annual total and a 528% increase compared to the second half of 2023.
Naira-for-Crude Policy Falters
The persistent rise in forex demand came despite the federal government’s introduction of a naira-for-crude initiative in October 2024. This policy, led by the Nigerian National Petroleum Company Limited (NNPC), aimed to allow local refineries to pay for crude in naira rather than dollars to alleviate FX pressure.
While the initiative was praised for its potential to stabilise the naira and cut FX transaction costs, implementation challenges quickly emerged. In March 2025, the Dangote Refinery reportedly halted naira-based transactions, citing the need to meet dollar-denominated obligations on imported crude.
This move sparked concerns about the policy’s sustainability and led to renewed pressure on foreign reserves as refineries returned to sourcing dollars to meet production needs.
Heavy Reliance on Imported Crude
Oil sector analyst Olatide Jeremiah explained that while domestic refining is ramping up, imported fuel still makes up nearly half of Nigeria’s estimated 50 million litres of daily fuel demand.
He noted that the Dangote Refinery, capable of processing 350,000 to 450,000 barrels per day, only receives about 150,000 barrels daily from domestic sources under the naira-for-crude policy. The shortfall has forced the refinery to import crude, often purchasing up to four tanker loads weekly, further deepening the demand for foreign currency.
“Dangote has to make up the difference with imported crude, which he pays for in dollars. That alone is a major driver of FX outflows and is putting the naira under strain,” Jeremiah stated.
Imports Slide Across the Board
The upward pressure on dollar usage contrasts starkly with the trend in imports. Oil shipments saw year-on-year declines in almost every month of 2024. Notable drops occurred in June ($844 million vs. $870 million in June 2023), September ($741.6 million vs. $1.51 billion), and December ($683.97 million vs. $851.43 million).
Non-oil imports also fell, albeit less drastically, dropping from $30.81 billion to $26.98 billion—a decline of 12.4%. Informal cross-border trade declined by 11% to $1.98 billion.
In total, Nigeria’s imports dropped to $43.71 billion in 2024, down from $52.27 billion in 2023. On a Free on Board (FOB) basis, oil imports fell by 23.2%, aligning with the CIF decline and confirming a real contraction in value, not just shipping costs.
Policy in Focus
Despite the setbacks, the government reaffirmed its commitment to the naira-for-crude scheme in April 2025, ordering its indefinite continuation. Still, analysts say, unless crude is consistently supplied to local refineries in sufficient volumes and FX liabilities are addressed, the sector’s demand for dollars may remain stubbornly high, undermining the broader goal of exchange rate stability.