Nigeria’s finance ministry has paid importers 156 billion naira ($790 million) to cover subsidy payments owed from 2014, it said on Thursday, seeking to ease fuel shortages in major cities.
Queues at petrol stations have been growing over the last few weeks and worsened in recent days. A neglected refining system means Africa’s biggest oil producer is almost wholly reliant on imports for the 40 million litres per day of gasoline it consumes.
The fuel crisis began in early March when slumping oil prices and an impending general election sent the local currency to record lows, hitting importers who have struggled to open letters of credit with banks. Truckers, unable to discharge tankers, went gone on strike over the cash crunch.
The finance ministry issued Sovereign Debt Notes (SDN) to fuel marketers in March, but banks remained reluctant to issue letters of credit until they matured.
“Even though we had the SDNs, they (banks) never had enough confidence. Now that it has been honoured, they can open L/Cs (letters of credit),” Obafemi Olawore, the executive secretary of the Major Oil Marketers Association of Nigeria (MOMAN) said.
“We didn’t have the money to place orders and pay contractors, like the truckers … who went on strike.”
The post-dated SDNs of 100 billion naira matured on Thursday, an emailed statement from the finance ministry said, along with an additional 56 billion naira in interest to marketers, which is expected to allow importers to complete their deals.
Oil traders said plenty of product was waiting offshore to discharge but payment uncertainties have held it back.
Despite the payment, another 200 billion naira is still outstanding, which includes foreign exchange from 2014 and 2015 and about 40 billion in subsidies accumulated so far in 2015, Olawore said.
Gasoline is heavily subsidised by the government via the Petroleum Products Pricing Regulatory Agency (PPPRA), and outgoing President Goodluck Jonathan’s own efforts to scrap subsidies in early 2012 caused riots. Slow repayment of subsidies has been a problem for the last few years.