‘ Nigeria lost 70% of forex in 12 years to oil domestic allocation’

NIGERIA lost 70 per cent of its oil revenue to Domestic Crude Allocation ( DCA) between 2010 and 2022, a policy memo by Agora Policy has revealed.

This month’s report, tagged ‘ Cancelling domestic crude oil allocation is Nigeria’s surest path to easing forex supply crunch’, noted that as of 2010, flows from oil and gas accounted for 94 per cent of forex to the Central Bank of Nigeria ( CBN), but dipped to 24 per cent by June 2022.

This comes as President Bola Tinubu directed that all revenue from crude oil sales must go to the apex bank as against the Nigerian National Petroleum Company Limited ( NNPCL) that currently performs the function. An unconfirmed report said under the new arrangement, NNPCL will submit receipts for crude oil to CBN for vetting and documentation.

The move, experts said, resonates with the new direction of the current government to toe a different path.

The report observed that with the drastic reduction in oil production and shift in arrangements from joint ventures ( JVS) to Production Sharing Contracts ( PSCS), most of the federation’s share of produced crude oil is channelled to DCA, which has dramatically risen from below 10 per cent of federation’s share of oil in the early 2000s to almost 100 per cent by 2023.

Specifically, on forex flows, the report maintained that the practice is injurious to survival of the country, especially at this time.

“It is a key challenge because the revenue from DCA sales is received in Naira, meaning that the Central Bank of Nigeria ( CBN) is starved of a steady and healthy flow of foreign exchange from what used to be its dominant source: crude oil sales. As of 2010, flows from oil and gas accounted for 94 per cent of forex to the CBN, but plummeted to 24 per cent by June 2022, and is conceivably much lower now...”, the document pointed out.

The report stated that while it is not a guarantee that the Naira payment from DCA would translate to any revenue to the Federation Account because the “NNPCL is in the habit of making upfront deductions for sundry reasons from revenue accruing from the DCA,” the move by the President to ensure all oil funds are domiciled in the CBN may likely be the magic wand in this regard. Read the remaining story on www. guardian. ng