The continuous upward climb of the foreign exchange in the country is heavily impacting on the downstream oil sector with many major marketers shutting down their fuel filling stations because of their inability to import the product.
The Nigerian Midstream Downstream Regulatory Authority (NMDPRA) Chief Executive, Mr Farouk Ahmed, last week at the Oil Trading Logistics Africa Week 2023 in Lagos, disclosed that an average volume of 44.3 million litres of Premium Motor Spirit (PMS), popularly called petrol, was evacuated daily for distribution in the country. But now, this figure has fallen drastically because most of the marketers are not importing fuel.
Currently, no fewer than 86 oil trading companies may have dumped their various permits to import PMS because of the country’s worsening foreign exchange crisis.
Ahmed disclosed that out of the 94 wholesale suppliers that were issued permits to import PMS into the country, only eight suppliers delivered eight cargoes of PMS totalling 251,000 MT within the period between June and September, this year.
According to him, the low import performance was due to the challenge of forex illiquidity which has constrained the oil marketing companies’ ability to import the product.
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‘‘But we are hopeful that the necessary efforts being taken by the government to improve the stability of harmonized forex market will support the importation of PMS by more oil marketing companies alongside NNPCL,’’ he said.
Executive Secretary, Major Oil Marketers Association of Nigeria (MOMAN), Mr Clement Isong, said that marketers could not source forex to import petrol from the Importers and Exporters (I&E) window of the Central Bank of Nigeria (CBN) because the window is illiquid as there was no money there.
“To buy products, it costs you between $25 million to $30 million. You can’t find it in the I&E window. So, it doesn’t work and that is why people are not importing.
“We can’t find dollar again, you can’t find it right now. Nigeria has to sort out the security issues in the Niger Delta so that we can increase our daily crude oil output. If we increase it to 1.8 or two million barrels per day, then there’ll be dollar in the market. So, we need to stop oil theft,” he said.
Other oil dealers said that the CBN Importers and Exporters official window for foreign exchange, which boast of a lower exchange rate of about $740/litre, had remained illiquid and unable to provide the $25 million to $30 million required for the importation of PMS by dealers.
Some of the industry observers who spoke to Sunday Sun in separate interviews said that only the NNPCL was importing fuel for now because they have access to forex.
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They argued that the development has forced the government to return to a subsidy regime because it was no longer profitable for marketers to import and sell at the pump price rate of NNPCL.
But Ahmed assured that it was in talks with the CBN to make dollar available to importers so that they could resume importation.
At a recent meeting with marketers at the headquarters of NMDPRA, the operators said that they seamlessly discussed the issues hampering the distribution of petroleum products in the country and came out with results.
According to the operators, the meeting was convened to address the major challenges faced by the oil marketers, which include foreign exchange scarcity for the importation of petroleum products, non-functional refineries, banks’ refusal to provide loans, and bad roads across Nigerian cities.
Ahmed assured that marketers have agreed to support the Federal Government in ensuring the availability of petrol to Nigerians at an affordable price.
“We had very robust discussions and they (oil marketers) expressed their concerns and also areas where we can support both the marketers and transporters to ensure that there is flow of petrol products across the country. So, NNPC has assured of supply and also the marketers have expressed their concerns about the availability of foreign exchange in order to also import and sell at the price.
“We, as regulators, can continue to say the market is open for everybody and all those who have applied for a license, over 90 marketing companies have gotten.
“We have given them access to all the required support that they needed to ensure there is a constant supply of products in the country,” Ahmed said.
On the foreign exchange challenges faced by marketers, he explained that engagement had been ongoing with the Central Bank of Nigeria (CBN) in that direction to make the dollar available.
“We have been discussing with the government and if you must have observed that a lot of work is going on within the CBN in terms of their internal restructuring which will make available the dollar as soon as everything stabilizes.
“We are also working towards improvement in crude oil production, which will bring more revenue into the country and then, of course, boost our foreign reserves. These are all part of the factors that we are all working on towards stabilizing the naira,” he noted.
Credit : Ourheritagereporters