Problems relating to obtaining local financing and letters of credit continue to constrain diesel imports into Nigeria, Platts reports.
The current healthy demand in the region could lead to low diesel stocks, as is currently the case for petrol, with resupply hampered by domestic financial difficulties. Nigeria is reliant on imports of diesel as local production fails to meet demand amid very low domestic refinery utilization rates and continuing problems more generally in the oil sector.
Letters of credit (LC) are issued by banks as a form of guaranteeing payment of imported products, but securing them remains onerous and require capital. With Nigeria currently in the grip of something of a currency crisis as a result of the fall in the crude oil price, obtaining the dollars required to back the LCs is no small task amid dwindling foreign reserves, especially for a small or independent company. This uncertain situation means some of the larger arbitrageurs are wary of the local market, terming it “too risky.”