NIgeria - Naira Drops As Fuel Importation Resumes

The naira slumped at both the interbank and Wholesale Dutch Auction System (WDAS) segments of the forex market yesterday as oil marketers commenced importation of petroleum products for the second quarter (Q2).

In an advertorial Monday, the Petroleum Products Pricing Regulatory Agency (PPPRA) said it had issued permit to the Nigerian National Petroleum Corporation (NNPC) and 41 other eligible marketers for the supply of petroleum products for Q2.

Executive Secretary, PPPRA, Mr. Reginald Stanley, explained that “in line with the statutory mandate of the PPPRA, which is to amongst others regulate the supply and distribution of petroleum products nationwide, the PPPRA has issued permits to 42 eligible marketers for the supply of 4,794,075,000 litres of Premium Motor Spirit (PMS) for the second quarter of 2012. The volume to be supplied into the system for Q2 is based on marketers’ performance in the past and their ability to secure the needed funds.”

Consequently, the local currency slipped at both segments of the market as banks increased their demand for dollar to meet the request of their customers.

For instance, at the interbank, the naira shed 60 kobo to a dollar to close at N157.90 to a dollar, as against the 157.30 to a dollar it closed on Friday.

On the other hand, at the bi-weekly auction, the local
currency dipped slightly by 5 kobo to close at N156.06 to a dollar yesterday, compared with the N156.01 to a dollar it was last Wednesday.

The Central Bank of Nigeria (CBN) offered a total of $150 million to the market, same amount it offered at the previous auction.

Therefore, most dealers had to resort to the interbank market to cover the shortfall in supply at the WDAS.
At the Bureau De Change (BDC) segment of the market, the naira closed at N159.50 to a dollar.

Analysts predicted that the naira, which had been relatively stable since this year due to reduced fuel importation, would come under pressure before the end of the month, following the PPPRA order to the oil marketers.

The PPPRA had assured oil marketers that it had not stopped processing subsidy claims from genuine importers of petroleum products contrary to recent insinuations in some quarters.

Stanley had said that the agency had completed processing of all claims for marketers for 2011.

He explained that while marketers had been holding back on imports due to unavailability of credit lines by banks, the pronouncement on the proposed N888.1 billion for subsidy provided in the 2012 budget should give enough comfort, both to marketers and banks to resume imports very aggressively.

According to him, the mid quarter performance of the PMS showed 27 per cent achievement by marketers.

THISDAY had reported that the recent scarcity had emanated from abysmal performance of the marketers in the first quarter of 2012, due to the refusal of the banks to finance fuel importation because of the concern that the government might not pay subsidy.

PPPRA maintained its hard-line posture by delisting non-credible marketers from fuel importation and ensuring that only genuine marketers, with track records of performance received allocation for the second quarter of 2012.

THISDAY gathered that before Monday’s release of the 42 beneficiaries of the second quarter allocation, a lot of pressure was mounted on the management of PPPRA to increase the number of the beneficiaries, which were over 100 in 2011.

But a source at the agency told THISDAY that the management of PPPRA successfully resisted the pressure to avoid a repeat of the recent confusion that characterised the administration of subsidy, which resulted to a probe by the National Assembly.

He stated that one of the lessons learnt from the recent probe of the administration of subsidy is that “the fewer the number of credible participants, the more manageable the entire system will be”, adding that the recent confusion and suspicions arose largely because of the large number of participants.

“It is a fact that some of these participants are just brief case marketers, with no facilities. In 2006 when we started this exercise, only three major marketers, and the NNPC and NIPCO Plc participated and the whole country was wet with products.  Five major marketers, two independent marketers, NNPC and NIPCO imported products in 2007 and there was no crisis.

“There was no incident in 2008 when 17 independent marketers participated. In 2009, the list grew to include 24 independent marketers, without any allegation of fraud. But we started to hear stories when more participants came on board in 2010 and 2011 and the figures were on the high side, with over 100 marketers claiming to be importers,” he explained.

He stated that the PPPRA would not bow to pressure from the marketers to increase the number of participants.

The agency yesterday issued permits to 42 eligible marketers, including the Nigerian National Petroleum Corporation (NNPC) for the supply of 4,794,075,000 litres of Premium Motor Spirit (PMS) for the second quarter of 2012.

The volume to be supplied during the period, according to the PPPRA, is based on marketers’ performance in the past and their ability to secure the needed fund.

PPPRA also promised not to sanction the marketers for their poor performance in the fourth quarter of 2011 and the first quarter of 2012 because their performance was due to the “force majeure” in the operating environment.

However, marketers that fail to import the approved allocation in the second quarter stand the risk of being excluded from importation for at least two quarters.

via THISDAY