At
least 75 ships with two and a half million tonnes of fuel are awaiting
importers on the high seas as Nigerians can’t find the dollars they need
to pay for the cargoes, according to ship tracking data and fuel
traders.
A Reuters report said some of the
vessels arrived a month ago and their frustrated owners have almost
given up hope and started to offer their fuel to buyers outside Nigeria.
A slump in world oil prices has hammered
Nigeria’s state income and because crude sales are the government’s
main source of revenue the fall has caused crippling shortages of
dollars within the economy that have been hurting businesses for months.
In a bid to break the impasse and head
off more fuel shortages, the government raised the price cap for petrol
by 67 per cent officially sanctioned importers to use the black market
to find the hard currency they need to get cargoes off the ships and
allowed any Nigerian company to import fuel.
Announced last week, the reforms were
welcomed by some in the oil industry as badly needed steps in the right
direction. The changes have largely eliminated the system of heavily
subsidised fuel prices, removing one strain on Nigeria’s increasingly
stretched finances.
But the so-called parallel market has struggled to cope with the demand for U.S. dollars that followed the reforms.
Nigeria consumes 45 million litres of
gasoline a day, or roughly 280,000 barrels, which would require the
market to provide some $18 million a day. Though importers cover about
30 percent of this, with the state oil firm covering the rest, it is
still a big strain on the market for dollars.
The naira has already weakened due to
the spike in demand for dollars from fuel importers. Last week, the U.S.
currency fell to N324 on the parallel market, whereas the official
exchange rate has been held firm just under N200.
“The risk is that the parallel rate will
depreciate even more, giving the marketers a pretext for yet further
price increases at the pump,” said Alan Cameron, an economist covering
Africa with Exotix Partners.
President Muhammadu Buhari has resisted
International Monetary Fund (IMF) calls to devalue the naira, though
Vice President Yemi Osinbajo sparked speculation a devaluation may be on
the cards when he said the Central Bank had to change its policies.
Nigeria has four refineries but decades
of neglect mean it has to import most of its fuel, which was less of a
problem when crude was at $115 a barrel and the OPEC member was the
leading oil exporter in Africa ahead of Angola.
As well as the slump in crude prices,
which touched a 2016 low of $27 in January and were below $48 last week,
Nigeria’s output has also been hit by instability in its oil producing
Delta region, further reducing the state’s dollar revenues.
Nigeria’s production dropped this month
to 1.65 million barrels per day from 2.2 million and risks slumping to
its lowest since 1970.
In an effort to address the looming fuel
shortages, the Nigerian National Petroleum Corporation (NNPC) has begun
talks with at least three international firms to swap more of its crude
for gasoline, according to traders and oil executives.
But the drop in output due to the unrest
in the Delta – as well as the fact oil firms take more physical cargoes
as payment for services when prices are low – means the NNPC has less
crude to swap for fuel.
“There aren’t enough cargoes available
to NNPC,” said Dolapo Oni, head of energy research at Ecobank. “I don’t
see how it can get more from international oil companies.”
Signs of trouble ahead are growing. On
Saturday, Nigeria’s two main labour unions called for an indefinite
general strike from Wednesday unless the government reverses its plan to
increase the price of petrol, which many rely on for power generation
as well as transport.
Raising fuel prices is sensitive because
many Nigerians see the state subsidy as the only benefit they derive
from living in a major oil producing country which is nevertheless
gripped by endemic corruption and poverty.
The West African country tried to end
fuel subsidies in 2012, doubling the price of gasoline overnight, but
later reinstated some of the subsidy to end a wave of protests.
The only long-term solution for Nigeria
is to build its own refineries and fix the infrastructure, according to
Chinedu Ukadike, chief of staff to the national president of the
Independent Petroleum Marketers Association of Nigeria.
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