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Nigerian local financing hampering gasoil supply: sources

Increase font size  Decrease font size Date:2016-03-15   Views:702
Problems relating to obtaining local financing and letters of credit continue to constrain gasoil imports into Nigeria, according to sources.

The current healthy demand in the region could lead to low gasoil stocks, as is currently the case for gasoline, with resupply hampered by domestic financial difficulties.

"Import volume of gasoil [currently] is not high as it was in the past," a source said.

Nigeria is reliant on imports of gasoil as local production fails to meet demand amid very low domestic refinery utilization rates and continuing problems more generally in the oil sector.

Letters of credit are issued by banks as a form of guaranteeing payment of imported products, but securing them remains onerous and require capital.

"Most LCs have been required to be cash-backed [in dollars]," another source said.

With Nigeria currently in the grip of something of a currency crisis as a result of the fall in the crude oil price, obtaining dollars is no small task amid dwindling foreign reserves, especially for a small or independent company.

"If you are an independent company it is difficult to get LCs," a source said. "Most people are importing with their regular suppliers and have confirmed LCs...anybody with gasoil in Nigeria has it because they are a regular importer."

This uncertain situation means some of the larger arbitrageurs are wary of the local market, terming it "too risky."

"Worst case scenario they never show... and you [are stuck] with demurrage," a source said. "Local Nigerian [firms] are beyond my control."

However, some local importers said the market is adapting to a situation that has been in place for some time. "The market has absorbed the reality of a dual exchange rate system and import structures cognizant of this have been agreed," a source said. "[The] success is in finding a way to source the [dollars].
 
 
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