Forex scarcity for petroleum products’ importation persists

Despite the naira free-float policy by the federal government, previously fixed at around Naira 197, foreign exchange scarcity for petroleum products’ importation still persists.  Foreign exchange demand still outstrips supply, liquidity remained low and this has created the emergence of a parallel market with rates hitting as much as N365 to a dollar.

Sources from operators in the Nigeria’s downstream sectors told BusinessDay that the first allocation for petroleum products importation from the Central Bank under the new policy hover around $1 million for all the marketers which they consider grossly inadequate thereby curbing importers’ ability.

The marketers also said that the process of getting the forex is so slow and they are not getting the needed volume of forex that could have allowed them to import.  They said the government should change the template for the petrol so that they can sell under the regime of an appropriate market forces.

“There is no clarity on forex. At some point, the price for a litre of petrol will be more than N145 and nobody will import anything”, said Yomi Awobokun, Chief executive of Oando Marketing at a recent Business Clinic organized by the Petroleum Downstream Group of the Lagos Chamber of Commerce and Industry.

Nigeria’s huge appetite for Petroleum products consumes about 40 million litres PMS per day with most of the products imported as the country’s refining capacity is not sufficient to satisfy domestic demand.

The federal government had hope that with the cut the subsidy on imported PMS, which allowed marketers to sell the product on the domestic market at a capped price of Naira 145/liter, from around Naira 86/liter previously, petroleum marketers would freely import products but this has not been the case as liquidity remained low.

Marketers exposure balloon to N266 billion

The new exchange rate policy, typified by liberalisation of the foreign exchange market is creating uncertainty in the downstream sector with the possibility of fuel scarcity in no distant time.

Besides, legacy debts of oil marketers occasioned by the new exchange rate of between N282-284/$ from the previous N199/$ have ballooned to about N266 billion.

This is against the N190 billion that they were supposed to pay at the old rate of N199/$.

The implication is that delay in paying the debt coupled with the foreign exchange liberalization policy has brought the difference of N76 billion.

A reliable source from the oil marketers told BusinessDay that government’s insistence that they use the current exchange rate to settle the legacy debts will mean that the marketers will have to look for the differentials which is about N76 billion in order to liquidate the debt.

“These businesses were transacted almost 2 years ago and now, they want us to use the exchange rate of N282 to a dollar to clear these matured obligations that was transacted at the rate of N200. Government is asking us to bring the differentials to make up the difference. That will kill the downstream sector in Nigeria and meanwhile, the interest is piling up at the offshore banks”, the source said.

It is understood the 80 percent of that debt is from two international banks; BNP Paribas and Citibank.

Oil marketers said the NNPC is under cutting the market   because of the price it is selling the product. It sells at N 111 for a product that is costing about N126-127 per litre. They said if they import and sell at about the price NNPC is selling they would run out of the markets.

Already fuel supply from the Nigerian National Petroleum Corporation NNPC  to  marketers  has become unsteady as some  marketers would have for some days  and  may not have for some other day.

   NNPC is the one that supplies the bulk of the fuel and some stake- holders are saying it cannot carry the burden for too long. The  corporation is alleged  not  to be importing  enough  as evidenced in  its ability to supply  product it  depots in Mosimi , Ilorin and  Ore  where the facilities  are still  in   good  conditions to take in product for  dealers  to  pick.

Other stakeholders informed BusinessDAY that the NNPC stocks are not stable and it is beginning to make the market apprehensive as many of  the filling stations outside Lagos and Abuja  operate one day on and about three days off, an indication that all  fuel scarcity has started creeping gradually because it has stopped supplying products to it depots across the country.

According  Nojeem Korodo, chairman Lagos Zonal Council of the Nigeria Labour  Congress and Chairman of National Union  of Petroleum and Natural Gas association NUPENG who explained why the supplies has been unstable in the larger part  of the country, he said,  he said,  the NNPC  has stopped supplying  products to  it  depots  in the hinter land  saying  that every one is the dark as regards what  ia happening  to the depot.

He said  that all  the supplies are diverted to private depots in Lagos  and because of this many  other stakeholders  that  would  have ordinarily been  encouraged  to  imports are not  because NNPC supplies their depots and abandoned its own.

Attempts to get Garba Deen Muhammad, the group corporate affairs manager  of the  NNPC to throw more light  on what is  happening  has not been successful as  he neither respond to calls or return text messages.  When BusinessDay accused him  of not  always responding to calls and text  , he  replied”:  You   have  concluded that I take  delight in not responding to your enquiries?.It never occurred to you that I could have constrained by factors beyond my control/ May you go ahead with your story, but respect the rules governing your trade”.

FRANK UZUEGBUNAM