Operators in the oil and gas sector have blamed the ongoing fuel scarcity witnessed across the country on the Central Bank of Nigeria, CBN’s directives to financial institutions.
According to the operators, who chose not to be named, in late December 2014, with oil prices falling, CBN directed all banks to reduce transactions with oil and gas companies due to pending liquidity issues and fiscal challenges in meeting the vast funding demands of oil and gas companies.
The communiqué, the operators said, was sent out on the back of a recent risk-based supervision exercise which highlighted the financial industry’s level of exposure to the oil and gas sector combined with existing risk management deficiencies, and the necessary steps to ensure that banks have sufficient capital buffers to mitigate escalating risk-taking activities.
They said: “Additionally, CBN recently closed the retail Dutch Auction System/wholesale Dutch Auction System, rDAS/wDAS, segment of the foreign exchange market, and quoted an exchange rate of N198, inferring a naira devaluation at the interbank foreign exchange market and further prompting pressure on the nation’s currency.
“The apex bank also banned commercial banks from re-selling CBN dollars to other banks in an attempt to end naira speculation, and by scrapping its window of direct sale of foreign exchange to end users has directed that all foreign exchange needs are to be sourced from the interbank market, which has rate ranging from N197 to N198 to $1.
“Consequently, the CBN’s actions have led to precautionary measures taken by marketers on the importation of products, and a larger reliance on product allocation by the Pipeline Product Marketing Company, PPMC, the marketing entity of NNPC, which said it had injected a further 688 million litres of PMS into the market to alleviate the ongoing shortage.”
They said marketers now face the challenge of fund sourcing, letters of credit and, more critically, restrictions on the purchase of Forex to enable the steady flow of product importation and that they will find it very difficult to function without the appropriate fiscal backing required from commercial banks and CBN in particular.