- Oil traders around the world are gradually shifting away from using the US dollar
- Recent reports say major economic powerhouses have used alternative currencies in oil trades in recent times
- Most oil deals in the last year have been settled primarily in the Chinese yuan
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Following the Russia-Ukraine war, more countries have moved away from the petrodollar, as over a fifth of global oil transactions in 2023 were done in currencies other than the US dollar.
As operators in Nigeria seek ways to settle oil and gas in Africa’s largest oil-producing country, JP Morgan said the sanctions are encouraging governments to settle deals in other currencies.
Credit: Bloomberg/Contributor
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Three countries choose alternative currencies to the dollar
Countries like Russia, China, and Iran were seen breaking from the petrol dollar norm as the US dollar began to have more robust competition.
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According to the Guardian, China is projecting its currency as an alternative in global oil trades. On Wednesday, December 28, 2023, Russia and Iran inked a deal to trade in their local currencies instead of the US dollar.
Iran said:
“Banks and economic actors can now use infrastructures including non-SWIFT interbank systems to deal in local currencies.”
Aside from the concern over growing dependence on the dollar, countries fear possible sanctions that could cause economic tension during political crisis.
Between 2015 and 2021, about two significant transactions were finalized in US dollars, and in 2023, the number increased to 12 as the Chinese yuan is said to have become the fourth most popular international settlement currency.
In October 2023, China completed a major international oil deal in digital yuan.
Crude oil buyers demand to move from dollar to local currency
Crude oil buyers for modular refineries in Nigeria have expressed worry over sourcing millions of dollars to purchase crude locally despite its inflationary measures.
The Guardian quotes the Managing Director of the Niger Delta Holding Company (NDHC), Chiedu Ugbo, as calling for a halt in the sale of gas in dollars.
He said the gas sales should not be denominated in US dollars and then exposed to the volatility in the foreign exchange market.
Other oil marketers called on the Nigerian government to assist modular refineries in buying crude in local currency.
FG gives oil firms in Nigeria strict orders on Dangote as 6 Refineries are set to begin operation
Legit.ng reported that the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has ordered oil companies in Nigeria to supply about 483,000 barrels of crude oil daily to local refineries for the next six months beginning January 2024.
The initiative is part of Nigeria’s efforts to ensure regular supply to local refiners for domestic consumption.
About six local refineries are expected to begin production in the coming year, including the 650,000-capacity Dangote refinery and Nigeria’s three refineries in Port Harcourt, Warri, and Kaduna.
Source: Legit.ng
