Forex Scarcity Raises Concerns Over Petrol Importation, Threatening Fuel Availability

In a developing concern for oil marketers, forex scarcity is hindering petrol importation, potentially jeopardizing fuel availability in Nigeria. Despite recent deregulation efforts in the downstream sector, apprehensions loom regarding the resurgence of fuel scarcity.

When oil marketers successfully advocated for the removal of fuel subsidies and the deregulation of the downstream sector, there was widespread hope for an end to Nigeria’s chronic fuel shortages. The deregulation was expected to break the monopoly held by the Nigerian National Petroleum Company Limited (NNPCL) in petrol importation.

However, several months after President Bola Tinubu announced the end of fuel subsidies on May 29, the monopoly of NNPCL in petrol importation remains unchallenged. Since the initial import of 27 million litres of petrol by Emadeb Energy in July, independent oil marketers have been unable to import any petrol, leaving NNPCL as the sole importer.

This monopoly has undermined the intended benefits of sector deregulation, allowing NNPCL to continue fixing prices and leaving the nation vulnerable to fuel scarcity.

Both the Nigerian Midstream and Downstream Petroleum Regulatory Authority and NNPCL have argued that other marketers are free to import petrol, provided they have the necessary licenses. However, the National Controller Operations of the Independent Petroleum Marketers Association of Nigeria, Mike Osatuyi, cited forex scarcity and rising crude oil prices as reasons for marketers refraining from importing petrol.

The fluctuating exchange rate, with a dollar being exchanged for N770 at the Investors’ and Exporters’ forex window and 985/$ at the alternative market, is further compounding the issue. Emadeb Energy’s Chief Executive, Adebowale Olujimi, emphasized that petrol importation was not a sustainable solution, calling for the revival of local refineries as the way forward.

The dream of fostering healthy competition to reduce prices, which was the goal of sector deregulation, seems elusive as marketers struggle to access forex. The NNPCL’s spokesperson, Garba-Deen Muhammad, suggested that their fuel imports would decrease when the Dangote Refinery commenced operations, in which NNPCL owns a 20 percent stake.

Since the end of fuel subsidies, petrol prices have surged from N180-N200 per litre to N614-N700 per litre. Concerns persist that prices could rise even higher due to the exchange rate and international crude prices. A source highlighted the forex challenge, stating that banks are hesitant to finance deals, and depots are running low on stock, potentially necessitating reliance on NNPCL for supplies.

The controversy escalated when the IPMAN Mosinmi Depot threatened legal action against NNPCL for failing to supply products eight months after payment. According to IPMAN Mosinmi Depot, each member had paid N25 million for 45,000 litres of petrol truck but had not received their supplies.

Despite NNPCL’s assurances, Nigeria has experienced two fuel scarcity incidents since the government’s deregulation announcement.

While some, like Akin Akinrinade, Chairman of the Satellite Depot of IPMAN, attribute the shortages to stock issues, others, including the President of the Petroleum and Natural Gas Senior Staff Association of Nigeria, Festus Osifo, maintain that there are sufficient products in the country.

A source at the Nigerian Midstream and Downstream Petroleum Regulatory Agency revealed that as of early September, there were 200,000 metric tonnes (equivalent to 450 million litres) in shore tanks at various depots in Lagos.

With independent marketers unable to import petrol, hopes are now pinned on Dangote’s 650,000 barrels per day refinery, initially set to begin operations in October. However, recent uncertainties have clouded its production start date.

Despite ongoing speculation about Dangote Refinery’s timeline, it remains a private business endeavor. Experts suggest focusing on making other local refineries operational rather than relying solely on Dangote Refinery.

In conclusion, the challenges in the downstream sector persist, with forex scarcity and market dynamics posing significant hurdles to sustainable petrol importation and pricing stability. The fate of fuel availability in Nigeria may depend on addressing these issues and advancing the nation’s refining capacity.