As the country continues to rely on importation for
most of its fuel needs, the recent devaluation of the
naira is taking a toll on marketers as the cost of
importing fuel has increased.
This is coming on the heels of the delay in the
payment of subsidy arrears by the government, for
which marketers were said to be groaning as they
could not make fresh order for the product.
Following the weakening of the naira by the decline in
crude oil prices, the Central Bank of Nigeria was last
week forced to devalue the currency by 8.5 per cent
from N155 to N168 to the United States’ dollar.
Nigeria, Africa’s largest oil producer, relies heavily on
imported refined petroleum products for the servicing
of the economy, creating a lucrative market for
refiners in the United States, Europe and other African
countries such as Cameroun and Cote d’Ivoire.
The Chairman, Nigeria Union of Petroleum and
Natural Gas Workers, Lagos Zone, Alhaji Tokunbo
Korodo, in a telephone interview with our
correspondent, said, “The devaluation of the naira is
part of what may lead to scarcity. Most of the fuel
importers are having a serious setback.”
“Apart from that, some of the importers are not willing
to import fuel as a result of non-payment of subsidy
arrears. According to information some of them are
peddling around, the money will not be paid until after
elections. Some of the marketers are seriously
complaining about their subsidy payments and that is
why some of them are not even going into fresh
importation. The ex-depot price of the fuel at the
depots is also increasing on a daily basis because
some of them are running out of stock.
“So, we are likely to face a lot of challenges this
festive period if urgent steps are not taken by the
government or the relevant authorities,” Korodo
added.
An energy specialist at Ecobank, Mr. Dolapo Oni said
as a result of the devaluation, the cost of importing
fuel had increased, especially since the country
operates on landed cost.
“So the Letter of Credit opened by a bank is not paid
until the goods land, by which time the dollar rate is
often higher,” he said.
In its latest briefing note on energy, oil and gas,
Ecobank Research said the combination of high dollar
rates and non-payment of fuel subsidies had put the
petroleum marketers in a situation where they were
running low on reserves of key fuels.
“Delay in payment of fuel subsidies in Nigeria
continues to impose financial costs on petroleum
marketers, even as security challenges in the northern
part of the country also affect operations,” according
to the report.
The amount spent on fuel imports to the country in
the second quarter of this year increased by 50.2 per
cent to $4.01bn from $2.67bn in the first quarter,
according to the data from the Central Bank of
Nigeria.
The CBN said “the growth in oil sector imports was
mainly facilitated by the low domestic refining
capacity which induced increased importation of fuel
to meet domestic demand.”
The country’s refineries have long been operating well
below installed capacity as they are in different states
of disrepair. They operated at an average of 10.46 per
cent of their combined nameplate capacity of 445,000
barrels per day in June, according to data from the
Nigerian National Petroleum Corporation.
The Ecobank report noted that the lower crude oil
price had actually benefited refiners in Middle Africa
who are now able to afford more quantities of the
previously expensive light sweet crude grades.
Refineries such as Cameroon’s 42,000 bpd SONARA
refinery and Cote d’Ivoire 80,000 bpd SIR refinery
which typically refine Nigeria’s Bonny Light and Brass
River crude grades, among others, are said to have
been able to boost production.
“As these crude grades yield more middle distillates
demanded by West African countries, the higher
output could potentially also boost petroleum product
trading between the two countries and Nigeria. The
SONARA, which, as of June was owed nearly $600m
by the government in fuel subsidy payments, is
expected to witness a major turnaround in its
operations.”
According to the report, the higher yield from
processing more light sweet crude and likely higher
output of petroleum products could even increase its
trade in petroleum products with Nigeria, where oil
importers are yet to place orders with European
refiners over unpaid subsidies.
“The SIR in Cote d’Ivoire was equally owed around
$95m by the government but has been able to secure
lines of credit from its bankers to take up more crude
oil feedstock. As a key fuel supplier to the Nigerian
market, the
SIR could strengthen its relevance to Nigeria as output
increases,” said Ecobank Research
http://www.punchng.com/business/energy/fuel-importers-under-pressure-from-devalued-naira/
How come most banks sell $1 for N190