Yemisi Izuora/Agency Report
Oil marketers in Nigeria are currently facing serious challenges relating to obtaining local financing and letters of credit to continue with importation of Diesel/Gasoil.
The current demand of the product could lead to low diesel stocks, as is currently the case for petrol, with resupply hampered by domestic financial difficulties.
“Import volume of gasoil currently is not high as it was in the past,” a report by Platts stated.
Nigeria is reliant on imports of diesel 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,” the report 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,” it 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.”
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,” it said. “The success is in finding a way to source the dollars.