Nigeria may be on the brink of yet another fuel scarcity as foreign banks suspend the credit facilities of petroleum imports. It appears that importers of petroleum products will not be able to keep up with fuel demands in the short term, as certain foreign banks suspend short and medium-term credit lines to their Nigerian counterparts. This is due to the failure of marketers to meet their mature foreign currency obligations of over $950 million.

In the event that these foreign obligations are not met, the country will once again be left with no option but to depend completely on the Nigerian National Petroleum Corporation (NNPC) for the supply of petroleum products. Dr. Ibe Kachikwu, the General Managing Director (GMD) of the NNPC said, earlier this year, that the organisation which supplies between 45 to 50 percent of the country’s petroleum products was not able to meet the fuel needs of the country adequately. Therefore, this has led to fears that Nigeria may yet again encounter another unwelcome episode of its infamous fuel scarcity.

Emmanuel Iheanacho, Chariman and Chief Executive Officer (CEO) of Integrated Oil and Gas, while speaking at a forum organized by the Lagos chamber of Commerce, said that nothing could work unless marketers had access to foreign exchange within a well-defined and well-organised market. He added that there could be no solution independent of the restructuring of the nation such that it depends less heavily on imports and in turn consumes less foreign exchange (FOREX). In addition to this, he expressed reservations about the Petroleum Equalising Fund, which he described as an unnecessary tax on trade, and stressed the need for the pipeline and products marketing company to reduce its involvement in trade.

Late last year, marketers complained that they were still owed billions of Naira by the Federal Government from the recently abandoned fuel subsidy scheme. Since then, they have received payments of N413 billion and more recently, N48.2 billion in March, but are still owed well in excess of N400 billion. Outstanding federal payments, compounded by the difficulty in accessing FOREX and strict fuel pricing regulations, are believed to have caused the persistent fuel shortages earlier this year. Since then, however, the government has taken steps to rectify the problem. The price of petrol was allowed to rise from N87 to N145 and the availability of FOREX improved through the adoption of a free flat foreign exchange regime, additionally, through introducing innovative parent-subsidiary FOREX sourcing arrangements. These measures were successful in bringing about a steady supply of petroleum products but there are fresh concerns about the product supply.

“Even if they paid all the N470 billion, it will still not be enough to pay off our foreign suppliers because the dollar value of what we require to offset matured debts is over $2 billion. The CBN Governor promised to help us, but nothing has happened,” a marketer said while speaking to The Vanguard. Marketers are calling on the government intervene on their behalf and settle their debts, but it still remains unclear whether or not the marketers will finally be able to meet their subsequent obligations in a situation where the government intervenes.

Fuel shortages in the first 5 months of the year led to long winding fuel queues, reduced economic activity and widespread frustration. In the absence of any government action it appears to only be a matter of time before Nigerians begin to go through the hardships of a fuel scarcity again.

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