The new set of challenges facing companies operating in the downstream sector might lead Nigeria into another fuel scarcity crisis.
Companies in the downstream sector have raised their concerns that unless something drastic is done to solve systemic issues witnessed by its operators, another scarcity cannot be averted.
A major part of the problem is the inability of operators to fund their new letters of credit due to the new forex policy. Most of their matured obligations were signed before the flexible forex rate came into being. Unless the government pay the differentials of the rate between NGN197 and NGN282 (current rate), there will be a scarcity due to the inability of petroleum traders to meet their obligations.
Manufacturers association of Nigeria has already confirmed that its members have lost at least NGN348.6 billion to the new forex rate. Their letters of credit, LCs were submitted when the exchange rate was NGN197 to 1USD. Thousands of jobs have also been cut to shed weights across various sectors of the economy.
Oil marketers might want to seek concessionary agreements with the government because of their crucial role in ending the scarcity and fending for their businesses.
Whatever is done, Nigeria cannot survive another fuel scarcity. According to the Central Bank of Nigeria, CBN the manufacturing purchasing managers’ index, PMI fell to 41.9 index points in June 2016, compared to 45.8. Nigeria is already in a recession, everything has to be done to prevent a total collapse of the economy.
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