The trading arm of Nigeria's state oil company has suspended gasoline imports, market sources in the region said, after over-buying in the wake of a fuel subsidy scandal last year.
| A gasoline refinery plant |
The Pipelines and Product Marketing Co (PPMC) has cancelled cargoes and told traders it will make no gasoline purchases in November, as it tries to work through a 10.2 million barrel (1.2 million tonnes) surplus of the motor fuel waiting offshore.
"All previously agreed laycans (deliveries) have been cancelled," one regional trading source said, "Nigeria has about 1.2 million tonnes offshore waiting to discharge."
PPMC spokesman Nasir Imodagbe said by telephone he was not aware of any cancellation of orders, but that a decision to suspend imports that would be that of the regulator, the Petroleum Product Pricing Regulatory Agency (PPPRA).
| Petroleum Minister, Madueke |
PPPRA spokesman denied there had been any suspension, but he added "we are regulatory body, we don't import ourselves."
But ship tracking data on Reuters showed around 45 oil products cargoes anchored off the coast of the port of Lagos, where the fuel comes in, waiting to discharge.
The import halt will likely hit oil refineries in Europe, which supply most of the fuel to Africa's most populous nation. At least 3.8 million barrels (450,000 tonnes) of gasoline is now expected to be looking for new buyers in the coming month.
Nigeria normally imports around 7.6 million barrels (900,000 tonnes) of gasoline each month, with PPMC responsible for roughly half of the buying.
The PPPRA, which allocates the other 50 percent of gasoline imports to private traders, has not yet announced its final requirements for the fourth quarter.
Market sources said the companies allocated imports by PPPRA are not expected to book any gasoline purchases before December.
GLUT ORIGINS
Industry sources said the glut had been created by a crude-for-gasoline swap programme that was expanded by the Nigerian government last year in the wake of a fuel subsidy fraud.
"It's a direct consequence of the crackdown on fuel subsidy fraud," an official working for a major Nigerian fuel marketer said.
"A lot of marketers are not being paid subsidy, so the government had to order the fuel itself. To do that, they had to sub-contract to a lot of people to bring the fuel in. They ordered too much."
Industry sources said the over supply had been exacerbated by low wholesale prices of gasoline in Europe, which had encouraged refineries and traders to do crude-for-gasoline deals this summer.
Traders in Europe had moved to dump a surplus of gasoline into West Africa in return for barrels of crude oil. Despite being Africa's largest oil producer, pumping 2.11 million barrels per day, Nigeria is reliant on imports of products like gasoline and kerosene due to an ageing refining system.
Parliament and the finance ministry last year both probed Nigeria's fuel subsidy programme, which provides gasoline and diesel to the population at prices well below international levels.
The probes exposed a web of corruption and fraud by government officials and fuel marketers that had cost the state billions of dollars, with much subsidised fuel never being ordered or being diverted to Nigeria's neighbours.
That led to the expansion of the crude-for-gasoline swaps programme, in a bid to remove cash payments from the system.
"When NNPC proposed to switch to a system of swapping crude for gasoline, everyone thought it was a brilliant idea as you deliver gasoline, get your crude and don't face payment problems," an executive at a trading company said.
"But then somehow, allocations went to too many people, who kept delivering gasoline even before getting crude. So as a result the issue of oversupply arose."
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