A lack of letters of credit (L/Cs) may be a reason behind a fresh round of fuel shortages in Nigeria and a backlog of gasoline waiting offshore to be unloaded.

Nigeria's main fuel dealers have been denied credit facilities by banks, and have consequently had to delay placing orders for clean cargoes of gasoline.

Payments outstanding

Sources suggest one factor behind the shortages is that the payment of around US$2.1 billion to domestic fuel marketers in outstanding subsidyclaims for gasoline imports have still not been approved by the central bank.

The government subsidises gasoline imports, paying thedifference between the cost of the fuel and the officially regulateddomestic pump price.

Offshore cargoes

While Nigerians are suffering fuel shortages, West Africa currently has a substantialbacklog of gasoline cargoes waiting offshore Togo and Nigeria.

Sources suggest that the backlog is caused by banks' refusal to open new L/Cs as well as the lack of foreign exchange in Nigeria.

Nigeria continues to import fuel as none of its four refineries are currently producing gasoline due to technical problems andpipeline sabotage.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.