June 2, 2012  by Agency Reporter 17 Comments

Nigeria faces fuel shortages as a crackdown on fraud and the government’s lack of funds to pay for subsidies have prompted private firms to halt imports, which could trigger unrest and harm the country’s faltering economic expansion, Reuters reported on Friday.

Half the money set aside for fuel subsidies this year has been spent on back payments and will soon run out. But efforts to remove the subsidy at the start of the year failed after protests and strikes forced the government to backtrack.

As a result, Nigerian and foreign firms are no longer willing to supply and distribute gasoline for cash, making Nigeria wholly dependent on swaps for crude to meet its fuel needs.

Nigeria’s finance ministry cut its economic growth forecast this month to six -seven per cent in 2012, from seven -eight per cent earlier, and fuel shortages could bring it down further.

Protests could also erupt, as they have before over the subsidy, a highly emotive issue.

Nigeria is Africa’s biggest crude exporter, but is forced to subsidise imports of gasoline to meet the bulk of its fuel needs because it lacks refining capacity.

A probe into the subsidy scheme found billions of dollars had been paid for fuel that never arrived or was resold abroad.

“Under the system it is impossible to make any profit if you are a small company paying interest on the subsidy money owed,” a Director at Eco-Regen, a small firm that imported gasoline last year, Mr. Emmanuel Ogwiji.

Despite presenting the authorities with documentation proving its activities were regular, his company had to wait half a year to be paid for the delivery.

Gasoline import permits have been issued to 42 marketers this quarter, but barely any have made use of their licences, shipping records show.

Instead, Nigeria has become dependent on a small pool of firms that are being paid for gasoline in oil.

“The government has stopped paying for the subsidy because the money they budgeted for has run out already,” said a trader based in Nigeria with an oil major.

“This will definitely lead to shortages. I am hearing people have stopped loading,” he added.

Crude is also being used to cover huge demurrage fees incurred by delays arising from ships being forced to wait offshore for weeks at a time before unloading.

At present, there are half a dozen or more tankers waiting offshore to deliver gasoline to Nigeria. Some have been there since April.

-Punch

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