In a strategic move to alleviate the challenges posed by dollar scarcity in Nigeria, foreign crude oil refiners have embarked on a novel approach by offering credit facilities to Nigerian oil marketers, according to insider sources.
Concerns have arisen among foreign refiners about potential loss of a significant market due to the removal of subsidies, leading to a marked reduction in the country’s petrol consumption.
This, coupled with forex scarcity and soaring inflation rates, has eroded the purchasing power of marketers for petrol imports.
A reliable source revealed that foreign refiners have initiated discussions with Nigerian oil marketers, offering credit terms for product procurement. However, accepting credit involves higher interest rates and additional charges.
“As of today, it pays you more to buy than to import because of the FX rate that has been going up. If you take products from the likes of Glencore and others, you would be exposed to high forex rates when you want to pay for the product.
“As a matter of fact, foreign refiners have been asking for meetings with Nigerian oil marketers because they want to give us products on credit because a lot of people don’t have that money to buy. But if you accept products on credit from them, the interest rate would also be higher, and you would also pay some charges,” the source stated.
Foreign banks have also emerged as a financing source for marketers striving to navigate the importation challenge, given the reluctance of local banks to expose themselves to forex volatility.
Official data from the Nigerian Midstream and Downstream Petroleum Regulatory Authority unveiled a first-half 2023 consumption of 11.26 billion litres, indicating a substantial reduction from the pre-subsidy removal figures.
Independent marketers are echoing calls for a transition from import dependency to revitalizing domestic refining operations.
Adebowale Olujimi, CEO of Emadeb Energy, emphasized that the path to sustainability lay in local refinery resuscitation, citing the financial strain and instability linked to importation.
“Petrol importation is not a sustainable way for a country to run. PMS price rising to over N600 per litre is an indication that the dynamics of the business are a tough one. It requires huge US dollars to bring products. The way forward is for local refineries to be revived,” he said.
In parallel, reports from Reuters underscore similar trends, with international refiners seeking to bolster exports to Nigeria in response to changing dynamics.
Argus-sourced data highlighted a surge in Russian petrol exports to Nigeria, soaring from 3,700 barrels per day in 2022 to 24,000 barrels per day in 2023.
As Nigeria navigates these shifts in its energy landscape, collaboration between foreign refiners and local marketers, alongside the pursuit of sustainable domestic refining, will likely shape the nation’s energy future.
