Nigeria’s main cities are facing acute gasoline shortages as importers feel the pinch of a plummeting local currency.
Importers are also facing tighter credit lines and unpaid government subsidies, oil traders and local industry sources said.
(WATCH VIDEO: Central Bank of Nigeria defends weakened naira)
As queues of double-parked cars stretch outside filling stations in the capital Abuja, empty tanks elsewhere are forcing consumers onto the black market just weeks before presidential elections on March 28 in Africa’s biggest economy.
“I have spent 12 hours here,” taxi driver Bartholomew Odey Akpa told Reuters on Monday. “I work at the airport as a car hire … and there is no fuel for me to go.”
Nigeria exports around two million barrels per day of crude but a neglected refining system means it is almost wholly reliant on imports for the 40 million litres per day of gasoline it consumes.
The picture is an unwelcome one for President Goodluck Jonathan, who faces former military leader Muhammadu Buhari in what is expected to be the tightest election battle since the end of military rule in 1999.
Nigeria’s state oil company tried to reduce panic buying on Friday by announcing additional supplies but to little avail.
Obafemi Olawore, the executive secretary of the Major Oil Marketers Association of Nigeria (MOMAN), said they began receiving the stop-gap gasoline on Tuesday morning.
FEELING THE PAIN
Gasoline is heavily subsidised by the government via the Petroleum Products Pricing Regulatory Agency (PPPRA), and Jonathan’s own efforts to scrap them in early 2012 caused riots.
Credit problems due to erratic subsidy payments have been magnified by the plunge in global oil prices and the country’s currency, leading to the buying freeze.
“It’s a mess for financing … I don’t think there is enough product on the way to fill up the tanks,” a trader said.
Nigeria’s naira hit a record low of 206.60 to the dollar in February, down 20 percent since its devaluation in November, and the central bank scrapped biweekly currency auctions in February to protect its haemorrhaging foreign reserves.
The move left importers with no choice but to pay higher interbank rates, further complicating financing.
“Marketers who handle about 50 percent of the market are not importing, as the banks are not opening letters of credit for them,” an industry source said.
Finance Minister Ngozi Okonjo-Iweala said on Tuesday 320.8 billion naira had been paid to marketers in December last year from the country’s rainy day fund, the Excess Crude Account.
“Last week we met the marketers and negotiated the terms of payment of the 185 billion naira,” she told a press conference.
She said the government will begin issuing Sovereign Debt Notes (SDN) to marketers on Wednesday to repay the remaining capital. SDNs, which serve as guarantees for marketers’ imports, are expected to be treated like cash.
MOMAN’s Olawore said a more immediate payment covering part of foreign exchange and interest costs was expected on Tuesday.
“We were told … the letters of credit would be reopened now that a payment was promised,” Olawore said. Further subsidy payments are expected throughout March.
Even some of those with access to financing were running down stocks, fearing that a missed payment for just one cargo could push them into bankruptcy.
(WATCH VIDEO: Nigerian naira weakens against the dollar)
This has put the burden on crude-for-products contract holders Sahara, Aiteo and state trader Duke Oil, operating through state agency Pipelines and Product Marketing Co (PPMC), which usually only import half of the country’s fuel.
Fear of chaos in both subsidy payments and at import terminals after the elections also caused shipments to dry up close to the original poll date of Feb. 14. A similar move is happening again.
“There is now a huge drive to get product there before the election,” one trader said. “It’s all going through the PPMC.”