Fuel shortages are set to worsen in Nigeria as international traders and local marketers back away from imports over fears that the cash-strapped new government will halt costly subsidy payments.
Already, lines at petrol stations in the major cities are blocking traffic as Africa’s largest crude oil exporter runs out of domestic fuels. The shortage in some rural areas is even more acute due to a payment battle between independent retailers and the government.
“We have exhausted our stocks,” said Stanley Yakubu, a worker at the Forte Filling Station in the Maitama neighborhood of Abuja. “We thought government and marketers have resolved their issues but supply is very slow in coming.”
Traders said new bookings for vital tanker imports of transport fuel into Nigeria have slowed to a trickle, and some cargoes offshore are being redirected to other regions.
Efforts by outgoing president Goodluck Jonathan in 2012 to end expensive subsidies, which would have doubled gasoline prices, led to riots in the street.
The steep drop in world oil prices would have cushioned consumers from any withdrawal of subsidies, but gasoline prices would still jump by roughly 30 percent if the current capped price of 87 naira per litre is allowed to move closer to the 115 it would cost without the government support.
Additionally, as subsidies cover the difference between the capped price and the cost to buy the fuel on the international market, marketers worry Nigeria could end the payments without letting capped prices rise, leaving them to shoulder the potentially sizeable price difference.
Nigeria relies on oil exports for 80 percent of its revenue and has already burned through half of its borrowing allowance this year.