Nigerians are unlikely to see any respite from fuel scarcity, despite the National Assembly’s approval more than N590 billion for fuel subsidy payments and the release last week of the initial N408 billion by the Ministry of Finance and Debt Management Office.
The Debt Management Office issued sovereign debt notes to fuel marketers, and the Central Bank of Nigeria redeemed the notes, with all marketers’ accounts credited.
Even so, most marketers are reportedly unable to increase fuel imports or even import at all due to non-availability of US dollars to pay for such purchases.
Part of the problem is the convoluted process for fuel imports. First, thePetroleum Products Pricing Regulatory Agency (PPPRA) issues allocation letters to various marketers to import fuel.
Thereafter, marketers apply to the Directorate of Petroleum Resources to issue import permits based on the pricing agency’s approval. This step often takes as much as two weeks. Fuel marketers then contact foreign oil traders and refineries for fuel supplies. Once suppliers and the marketers agree on prices, the supplier issues pro forma invoices.
The marketers open Form “M” which they submit to their various local banks. The local banks then seek the CBN’s approval to open letters of credit, a process that takes about seven days. Once the approval is obtained, the local bank opens a letter of credit and seeks a foreign bank to add confirmation to the letter of credit. The foreign/confirming bank in effect grants a loan to the Nigerian bank. Usually, the expectation is that the loan would be repaid within a period of 60 to 90 days after shipment and presentation of documents showing shipment and delivery.
SaharaReporters learnt that many fuel marketers had opened letters of credit and even provided naira to local banks, but many of the local banks have been unable to access dollars from the CBN to enable them to clear past due obligations under letters of credit already granted.
Owing to a series of defaults, many foreign banks have been reluctant to handle Nigerian banks’ letters of credit.
An executive at one of Nigeria’s major commercial banks disclosed that some of the bank’s letters of credit issued in March have yet to be paid till date. He added that, with rapidly falling oil prices, Nigerian banks would not have sufficient dollars to meet past and present obligations.
Nigeria’s external reserves currently stand around $30 billion, with total forex requirement by the fuel marketers around $1billion.
To worsen matters, fuel marketers have been compelled to pay the Nigerian Maritime Administration and Safety Agency (NIMASA) and Nigerian Ports Authority (NPA) in dollars, even though the Federal Government has barred the spending of dollars within Nigeria.
CBN officials disclosed say the bank was not offering dollars indiscriminately because some fuel marketers were reselling dollars obtained at official rates in the parallel market at huge profits. The CBN sells dollars to banks at N199. One fuel importer alleged that, instead of offering the foreign currency to them, banks were selling dollars in the black market for N270-280.