A cursory survey of media reports on the
downstream oil sector suggests that the
prevailing popular belief is that a predatory cabal
has a vice grip over the business of fuel
importation.

There is concern, therefore, that this,
presumably, vicious class of businessmen would
do everything to ensure that refineries will never
work, and that the subsidy regime would subsist,
while fuel supply will continue to be carefully
manipulated to regularly induce artificial scarcity
so that bountiful profits can be harvested from
the attendant sufferings and economic
dislocation deliberately caused by the oil cabal.

Nonetheless, it will be useful to examine the
process of fuel importation more closely to
actually identify the real beneficiaries in this
business. Indeed, the major oil marketers, Total,
Mobil, Oando, Conoil, NNPC inclusive, and a few
others have not been fingered for collecting
subsidy with fake import papers.

However, it may be more difficult to vouch for
the innocence of the motley subset of hundreds
of indigenous independent marketers, as this
class also accommodates the ubiquitous
briefcase importer, who is clearly, a more
footloose buccaneer.It would probably be more
difficult to find a contrary view to the above
popular perception, than it is to find the
proverbial needle in a haystack. Besides, the
widely reported ‘extreme’ annual subsidy values
seem to also confirm that these fuel barons
make a kill on the back of fellow Nigerians.

Furthermore, despite several allegations that
marketers collect billions of Naira as refund of
subsidies on fuel supplies which were never
delivered, no convictions have, surprisingly, so
far resulted from EFCC’s tenuos efforts.

Sadly, much to the chagrin of the public, the
snail speed procedure for prosecuting financial
crimes, may, postpone judgment day for fuel
subsidy racketeers, while a judicial process that
is allegedly compromised may actually also set
the guilty free. However, let us examine,
hereafter, how profitable the fuel supply
business is for bonafide importers, who have to
borrow billions of dollars and Naira to finance
their operations.

The available data from the National Bureau of
Statistics indicates that fuel accounts for over
40% of Nigeria’s total foreign exchange
expenditure on imports annually. Thus, the
consolidated forex requirement for genuine
importers will exceed $5bn annually.

Instructively, commercial banks would buy the
required dollars, predominantly, from the Central
Bank at the official rate and then add between
1-2% premium on their purchases before selling
forex to importers; the banks could easily earn
up to $100m from such simple exchange
transactions.

However, the premium on each dollar sold may
well exceed N10 per dollar, whenever dollar is
relatively scarce and the parallel market
exchange rate is over N220 while official rate
remains below N200/$ as is currently the case.

It is also not immediately obvious to non
business persons, that the same banks lend fuel
importers the Trillions of Naira which they
subsequently exchange for dollars; presently,
marketers would pay between...


CONTINUE : http://www.beriahng.com/2015/07/fuel-imports-real-cabal-by-henry-boyo.html