More nations have abandoned the decades-long petrodollar system in the midst of the protracted conflict between Russia and Ukraine; in 2023, more than 25% of all oil commerce was conducted in currencies other than the US dollar.
JP Morgan told the Wall Street Journal that sanctions are pushing nations to settle oil agreements in other currencies, which coincides with operators in Nigeria looking for alternatives to pay domestic oil and gas trade in naira.
According to JP Morgan’s head of global commodities strategy, Natasha Kaneva, “the U.S. dollar is getting some competition in commodities markets,” nations like Iran, China, and Russia have been highlighting their efforts to overthrow the petrodollar.
Russia and Iran concluded an agreement to trade in their local currencies instead of the US dollar on Wednesday of this week, coinciding with geopolitical manoeuvres where China is pushing its currency as an option in international negotiations.
Iran had stated, “Banks and economic actors can now deal in local currencies by using infrastructures including non-SWIFT interbank systems.”
In addition to worries about their increasing reliance on the dollar, nations worry about potential penalties that would lead to economic strain in the event of a significant geopolitical crisis.
Only approximately two significant oil deals were settled in US dollars between 2015 and 2021; this year, that number increased to 12, despite the China yuan reportedly rising to the rank of fourth most widely used international settlement currency. The nation had closed a significant foreign oil sale in digital yuan in October.
In Nigeria, buyers of crude oil for modular refineries have voiced concerns about finding millions of dollars to acquire local petroleum, despite the country’s inflationary policies and dollar shortage.
Chiedu Ugbo, the managing director of Niger Delta Power Holding Company (NDPHC) Limited, had demanded that the selling of petrol in dollars be stopped.
He stated, “Gas shouldn’t be valued in US dollars and then subject to the whims of the foreign exchange market.”
Momoh Oyarekhua, the chairman of the Crude Oil Refineries Owners Association of Nigeria (CORAN), had previously urged the federal government to step in immediately to support modular refineries in their purchase of crude oil in naira.
Last week in Abuja, the Association for Public Policy Analysis (APPA) stated that concluded oil and gas transactions in Nigeria will boost the nation’s economy and lessen the pressure on the naira from foreign exchange rates.
