The US dollar makes the Nigerian economy go round.
Where would we be without it? If we had our way, we’d all earn in dollars and leave the pesky naira for the CBN and FG.
Nigeria’s retail energy sector is import-reliant, which means dollar dependence.
As such, the 2022 dollar scarcity has greatly contributed to higher energy prices for Nigerians.
Besides fixing our dollar supply through subsidy removal and higher exports, functioning refineries could reduce the demand for dollars from the downstream energy sector.
Nigeria’s 2022 dollar situation has severely impacted the energy sector. Ironically, the oil and gas sub-sector is partly responsible for our current dollar scarcity.
The chart above tells the story of the Nigerian economy’s dependence on oil. Basically, the Nigerian economy is strapped firmly to the oil rollercoaster. When oil is up, we’re up, and when it’s down, man, are we down. With crude oil making up over 70% of our export revenues—our primary source for dollars—you don’t need Sherlock Holmes to deduce that a decline in oil revenues affects our dollar reserves.
However, 2022 has been different. We realised that the flips and dips of the oil rollercoaster aren’t just determined by price but also by production. Take another look at the chart above. Between Q1 and Q2, we were still making record-high oil profits, but in Q3, when oil production crashed to less than 1 million barrels per day, the dust began to settle. Who knew that even with oil selling at over $100/barrel we must maintain production to enjoy the ride?