Fuel marketers have blamed the recent fuel scarcity on two recent directives by the Central Bank of Nigeria (CBN), concerning the devaluation of naira.
Some chief executives of some of the Oil Marketing and Trading (OM &T) companies, who volunteered information on the scarcity said the situation was triggered partly by the two directives of the apex bank to the commercial banks in the country.
One of the directives, according to the marketers, was issued around the end of December 2014, where the CBN directed the banks to reduce their transactions with oil companies to curb the challenges of meeting the huge funding demand of these companies and also address other liquidity issues.
The CBN’s directive, it was learnt, stemmed from the result of an earlier risk-based supervision exercise carried out by the apex bank, which revealed a huge financial exposure of the banks to the oil and gas sector.
The apex bank was said to be concerned about some risk management deficiencies, and was determined to take necessary steps to ensure that banks have sufficient capital buffers to mitigate escalating risk-taking activities.
The second directive of the apex bank was the recent closure of the retail Dutch Auction System/wholesale Dutch Auction System (rDAS/wDAS) segment of the foreign exchange market.
With the closure and the quoting of an exchange rate of N198 per dollar, the marketers said the CBN’s action was an indirect devaluation of the Naira at the interbank forex market.
As a follow-up measure to stop naira speculation, the CBN also banned commercial banks from re-selling CBN dollars to other banks.
Under this measure, the apex bank scrapped its window of direct sale of foreign exchange to end users, and directed that all foreign exchange needs should be sourced from the interbank market, with rate ranging between N197 and N198 per dollar.
The Executive Secretary of the Major Oil Marketers Association of Nigeria (MOMAN), Mr. Obafemi Olawore told journalists in Lagos that the high exchange rate resulted to the high costs of both petrol and diesel in the country.
“The unfortunate situation in which we find ourselves is that as the price of crude oil was dropping – as the international price of diesel was dropping, we devalued the Naira. For example, for Premium Motor Spirit (PMS), the exchange rate for bringing products before the devaluation was N171.36 per Dollar.
At that rate, the landing cost of PMS was N90.67 per litre. There was a time the exchange rate rose to N188, that is, N188 was the interbank rate, while the CBN gave us N171.36. But when it went to N188, the landing cost of PMS rose from N90.67 to N98.36.
As at today when the exchange rate has gone to N199 (there is no window again), the landing cost rose to N103.45. So, you see that the main factor here is the exchange rate,” he said.
According to the marketers, the CBN’s actions prompted them to take precautionary measures by relying on imported products from the Pipeline Products Marketing Company (PPMC).
Though the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala has given the marketers a concrete assurance that the N264 billion outstanding claims would be paid between now and end of March, the marketers are contending with the huge outstanding receivables due and payable to them by the federal government.
With the marketers’ failure to repay bank loans due to the government’s inability to pay the subsidy claims on verified cargoes within the 45 days stipulated in the Petroleum Support Fund (PSF) guidelines, the banks also refused to finance imports, thus aggravating the fuel supply situation.