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Dollar Shortage Stalls Fuel Imports

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Monday, May 16th, 2016
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Another fuel crisis looks set to rock the country as some vessels are stuck off Nigeria, unable to unload their cargoes of petrol and diesel.

At least 75 ships with two and a half million tonnes of fuel are waiting for importers in the country to find the dollars they need to pay for the cargoes, according to ship tracking data and fuel traders.

Some of the vessels arrived a month ago and their frustrated owners have almost given up hope and started to offer their fuel to buyers outside Nigeria, several traders told Reuters.

Our correspondents on Sunday gathered that a number of marketers who were given petrol import allocations for the second quarter of the year had not been able to source foreign exchange for importation.

An official of one of the major petroleum products marketers’ associations said on condition of anonymity, “I am not surprised that vessels are stuck. What I believe likely happened is that so many of our members were given allocations for the second quarter – some for April, some for May and some for June.

“But because they have not been able to source foreign exchange, the people will not deliver until they are sure of getting their money. A number of those that were given second quarter allocations have not been able to source forex.”

The Executive Secretary, Major Oil Marketers Association of Nigeria, Mr. Obafemi Olawore, said he did not know if some vessels were stranded due to lack of dollars or not.

He, however, said, “In any situation, there will be challenges and some people will not face any challenge. Some are importing; some are not. But the most important thing is, ‘Is the product available?’ I think so. It means those importing probably are more than those not importing.

“Foreign exchange is a challenge; there is no doubt about that. But people will import. It is their business, and they won’t want their business to collapse.”

A slump in world oil prices has hammered Nigeria’s state income and because crude sales are the government’s main source of revenue, the fall has caused crippling shortages of dollars within the economy that have been hurting businesses for months.

In a bid to break the impasse and head off more fuel shortages, the Federal Government raised the price cap for petrol by 67 per cent, officially sanctioned importers to use the parallel market to find the hard currency they need to get cargoes off the ships and allowed any Nigerian company to import fuel.

The Executive Secretary, Depot and Petroleum Products Marketers Association, Mr. Olufemi Adewole, had on Friday said, “The crux of everything we are saying borders on foreign exchange. Sourcing for foreign exchange is the key challenge. Marketers have been told to source for foreign exchange.”

Nigeria consumes 45 million litres of petrol a day, or roughly 280,000 barrels, which would require the market to provide some $18m a day.

The naira has already weakened due to the spike in demand for dollars from fuel importers. Last week, the US currency fell to 360 naira on the parallel market, whereas the official exchange rate has been held firm just under 200.

“The risk is that the parallel rate will depreciate even more, giving the marketers a pretext for yet further price increases at the pump,” said Alan Cameron, an economist covering Africa with Exotix Partners.

In an effort to address the looming fuel shortages, the Nigerian National Petroleum Corporation has begun talks with at least three international firms to swap more of its crude for petrol, according to traders and oil executives.

According to the marketers, some of whom got their petrol import permits from the Petroleum Products Pricing Regulatory Agency last week, the secondary or parallel forex market in Nigeria does not have enough United States dollars to meet their needs.

A senior official of one of the oil majors that got import permits last week stated that the pressure exerted on the parallel market by the PMS importers was the major cause of the continued crash of the naira against the dollar in the past few days.

“How much dollar can all importers access from the parallel market in Nigeria? As I speak with you now, some of us are making contacts with our partners in countries like Ghana and Liberia for forex,” the official, who spoke on condition of anonymity, said.

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