Fuel shortages hit Nigeria as currency woes hurt importers

Oil-rich Nigeria’s main cities are facing acute gasoline shortages as importers feel the pinch of a plummeting local currency, tighter credit lines and unpaid government subsidies, oil traders and local industry sources said.

As queues of double-parked cars stretch outside filling stations in the capital Abuja, empty tanks elsewhere are forcing consumers onto the black market just weeks before presidential elections on March 28 in Africa’s biggest economy.

“I have spent 12 hours here,” taxi driver Bartholomew Odey Akpa told Reuters on Monday. “I work at the airport as a car hire … and there is no fuel for me to go.”

Nigeria exports around two million barrels per day of crude oil but is almost wholly reliant on imports for the 40 million litres per day of gasoline it consumes.

The picture is an unwelcome one for President Goodluck Jonathan, who faces former military leader Muhammadu Buhari in what is expected to be the tightest election battle since the end of military rule in 1999.

Nigeria’s state oil company tried to reduce panic buying on Friday by announcing additional supplies but to little avail.

Femi Olawore, the executive secretary of the Major Oil Marketers Association of Nigeria (MOMAN), said they began receiving the stop-gap gasoline on Tuesday morning.

FEELING THE PAIN

Gasoline is heavily subsidised by the government via the Petroleum Products Pricing Regulatory Agency (PPPRA), and Jonathan’s own efforts to scrap them in early 2012 caused riots.

Credit problems due to erratic subsidy payments, already a burden for importers, have been magnified by the plunge in global oil prices and the country’s currency, leading to the buying freeze.

“It’s a mess for financing … I don’t think there is enough product on the way to fill up the tanks,” a trader said.

Nigeria’s naira hit a record low of 206.60 to the dollar in February, down 20 percent since its devaluation in November, and the central bank scrapped biweekly currency auctions in February to protect its haemorrhaging foreign reserves.

The move left importers with no choice but to pay higher interbank rates, further complicating financing.

“Marketers who handle about 50 percent of the market are not importing, as the banks are not opening letters of credit for them,” an industry source said.

A spokesman for the finance ministry said the minister met with marketers last week and agreed to further subsidy payments.

MOMAN’s Olawore said the situation should right itself soon as an subsidy allotment was expected on Tuesday.

“We were told at a meeting on Friday with the central bank and other banks that the letters of credit would be reopened now that a payment was promised,” Olawore said. Further subsidy payments are expected to be made throughout March.

The finance ministry last paid importers around 345 billion naira in December, he said, with about 265 billion naira left including cover for foreign exchange charges and interest.

Even some of those with access to financing were running down stocks, fearing that a missed payment for just one cargo could push them into bankruptcy.

This has put the burden on crude-for-products contract holders Sahara, Aiteo and state trader Duke Oil, operating through another state agency, which usually only import half of the country’s fuel.

Fear of chaos in both subsidy payments and at import terminals after the elections was also a reason why shipments dried up close to the original poll date of Feb. 14. A similar move is happening again.

“There is now a huge drive to get product there before the election,” one trader said. “It’s all going through the PPMC.”