• Tuesday, March 05, 2024
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BusinessDay

Cancelling Domestic Crude Allocation surest way to boosting FX inflow—Agora Policy to FG

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Agora Policy, a Nigerian think tank committed to finding solutions to urgent national challenges, has urged the Federal Government of Nigeria to cancel its Domestic Crude Allocation (DCA), believing that its cancellation is the best way among several solutions to drive in much-needed foreign exchange into the country.

The DCA is a system where a certain portion of the country’s oil production is reserved by the government for use within the country.

In its policy paper published on its website, the Abuja think tank that was very active during the February 2023 presidential election insists that amongst all the solutions implemented and mounted in the corridors of power, directing all its crude oil produced to the export market would not only ensure a steady inflow of FX but ultimately help stabilise the naira in the shortest possible time.

It said, “Of all the options being implemented or considered for boosting forex inflow into Nigeria, cancelling what is termed Domestic Crude Allocation (DCA) is Nigeria’s surest bet.”

Agora provided reasons for its summation, emphasising that “it will yield an immediate result and provide a steady (not one-off) flow of foreign exchange—and thereby address the cash flow challenge in the official segment of the forex markets.”

It also argued that “it will end the dodgy deductions and accounting associated with the domestic crude allocation policy that has been aptly described as an active crime scene.”

The research think tank believes that implementing this option amongst several others will increase the steady supply of foreign exchange into the country, thereby easing the demand pressure that has led to the slump of the naira. A situation that should help stabilise the currency in the shortest possible time.

It said, “It is our considered position that switching crude oil allocations from the DCA to exports will provide steady revenue in foreign exchange and thus boost foreign exchange supply in Nigeria. Ultimately, an increased and steady supply of foreign exchange will ease demand pressures and help to stabilise the Naira.”

Agora applauded other options, such as improving the security situation at production sites in the Niger Delta to curtail oil theft and re-engaging with capable partners to raise investments in oil production in the country.