Forex: Foreign suppliers cut fuel shipment to Nigeria over $985m debt

An acute shortage of foreign currencies across the country may have forced some overseas supplier of Premium Motor Spirit (PMS) popularly called petrol to suspend further supply of the commodity to Nigeria, over a $985 million debt overhang, Daily Sun findings has revealed.

Their decision to cut supplies to its Nigerian customers may not be unconnected with the inability of importers to source foreign exchange to offset some of their debt liabilities running into millions of Dollars. Dealers who spoke to Daily Sun, warned however that unless this is resolved, Nigeria may witness another round of fuel shortages.

Confirming the suspension of fuel imports, Executive Secretary, Depot and Petroleum Products Marketers Association (DAPPMA), Mr. Olufemi Adewole, told Daily Sun, that the $985 million debt profile was for supplies made when the exchange rate was N197/$1, which could not be settled due to forex scarcity.

According to him, the transactions using the N197 exchange rate were carried out between December 2014 and December 2015, but payment for over N448 billion was not cleared by the Federal Government until early 2016, when exchange rates rose above the N197 threshold.
He regretted local banks have since debited their accounts using rates of between N300 to N350/$1 for transactions done at N197/$1.

“Beyond our accounts being debited, local banks have since seized to fund our procurement requests as a result of our members huge debt profile,” he said. He also pointed out that banks now cross check to ascertain the level of a marketer’s debt, and when confirmed to be on the high side, credit lines are suspended

‘‘Most of our members have been debited to the tune of whatever their exposure is and right now, we cannot even access facilities from our banks to fund procurement because all the banks are refusing them. That is the challenge we have at hand now.

Now, the question is, who bears the difference between N197 and today’s current exchange rate.’’?
For now, he said most DAPPMA members depend on imports made by the Nigerian National Petroleum Corporation (NNPC) as their business activities have been grounded due to liquidity constraints.

Manager, Corporate Affairs, NIPCO Plc, Mr. Abiodun Lawal, echoed the position of Adewole, as he lamented that imports are at their lowest ebb.
Lawal said the situation was more challenging for independent importers, who have to rely solely on parallel market exchange rates to source forex because they lack support of the government.

He disclosed that the impact has not been felt much by members of the public because the demand for petrol has gone down drastically as a result of the biting economic situation in the country.

‘‘To give you an insight into the difficult operating environment for downstream players, depots that were loading 100 trucks before now, can barely do 40 trucks in a day. For those that have retail outlets, they can afford deliver same at their retail outlets and make some margins. But for those that don’t have any, it is a pathetic situation,’’ he lamented.
Source:Daily Sun