The Nigerian government has issued Sovereign Debt Notes (SDNs) to the country's fuel importers in an attempt to restore the use of letters of credit (L/Cs) in the market, but the move appears not to have had the desired impact.

A shortage of petrol in some Nigerian states has been blamed on the inability of petroleum marketers to obtain L/Cs from commercial banks, (DC World News, 13 March 2015).

Emerging crisis

Nigeria's fuel crisis began in early March when slumping oil prices and the then impending general election sent the local currency to record lows, hitting importers and causing banks to refuse to open L/Cs for fuel imports.

The finance ministry has subsequently issued SDNs to fuel marketers with the aim of providing banks with sufficient reassurance to become involved again in L/C transactions.

No impact

The move appears not to have had the desired effect and banks remain reluctant to write L/C business.

One banker told local media that even with SDNs, his bank would not involve itself in L/C business for fuel imports at the present time.

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