* Unions pledge protests if gasoline price raised
* Inflation at 11-year high of 17 percent
* Sellers want government cap on price raised
* Lower crude output means less to swap for gasoline imports
* Dollar shortage also a threat
By Libby George
ABUJA, Sept 14 Nigeria will not increase its
gasoline prices, President Muhammadu Buhari told his oil
minister and state oil firm head, summoned to his villa last
week, sources at the compound said.
Oil Minister Emmanuel Ibe Kachikwu, the head of state oil
firm NNPC Maikanti Baru and the entire government have stepped
up efforts to keep fuel flowing into Nigeria without repeating
the price increase of May and risking civil unrest.
Shortly before the meeting former Nigerian National
Petroleum Corporation (NNPC) bosses had said such an increase
may be needed.
A steep devaluation of the naira currency has made sales of
petrol at government capped prices unprofitable, marketers say.
Months of unrest in the Delta region has also cut Nigeria's oil
output and left as little as half the crude available that it
needs to swap for refined motor fuel from trading companies.
"Gasoline is the top priority" for NNPC, said one oil
industry source who, like many in Abuja was meeting daily with
officials in the oil company. The company, and government, the
source said, "will do whatever they can" to stop shortages and
keep prices stable.
In a statement last week, NNPC's Petroleum Products Pricing
Regulatory Agency, which oversees downstream regulations, said
there was "no basis" for price increase fears, and assured the
nation of "uninterrupted supply and distribution."
TAKING TO THE STREETS
Nigeria has four oil refineries, but none of them have been
able to run consistently enough to provide Africa's most
populous nation with enough gasoline and diesel - despite its
historic position as Africa's largest oil producer, pumping
around two million barrels per day.
That is, before unrest cut output by around a third earlier
Available, affordable gasoline is crucial to the
government's credibility. Shortages bring the nation to a halt,
leading to days-long queues for fuel and power cuts at small
businesses that rely on generators to withstand frequent power
Nigerian unions have already threatened to take to the
streets if prices rise further, as consumers face inflation that
is at an 11-year high of 17 percent.
The Independent Petroleum Marketers Association of Nigeria,
which represents small and medium fuel sellers, is, however,
calling for higher prices. It argues that the current state cap
of 145 naira per litre is far too low, given the devaluation.
The currency fell to 420 per dollar on the parallel market
last month, compared with the rate of 285 that the government
was using when it set the cap.
Gasoline is imported into Nigeria by NNPC and independent
importers, with each usually providing half the total needed,
but the government said it has been providing some 90 percent in
FOREX RESERVES SQUEEZED
NNPC, beset by dollar and oil shortages, is running a tender
to buy gasoline over the next six months, as sources say it is
concerned the current system of swapping crude and relying on
other importers might not provide enough.
Militant attacks have hit pipelines and cut output by more
than 700,000 barrels per day. As a result, NNPC has only around
four crude oil cargoes per month this autumn to swap for
gasoline, according to sources, compared with at least 10
cargoes during the spring months.
In its tender, NNPC asked for 90 days to repay in either
cash or crude, which is as much as three times longer than the
standard repayment window.
But the longer repayment, oil industry sources said, will
both alarm some suppliers and could force NNPC to pay more.
"Companies will supply it - but they will submit terms where
they think they can make money," another oil company source
said, adding it would be difficult for NNPC to get competitive
The naira collapse, and lower oil exports, has cut
significantly into Nigeria's foreign exchange reserves,
squeezing access to the U.S. dollars importers need.
But NNPC made sure gasoline importers were able to access
dollars. Oil majors including Chevron, Exxon and Shell have to
buy naira for local operations, a key channel through which
dollars arrive. NNPC has funnelled around $500 million of this
to gasoline importers over the past several months, sources
"If fuel marketers are unable to recover cost, they will
simply stop importing," regardless of whether they have dollars,
said Alan Cameron, economist and director of Exotix.
Some are sceptical of NNPC's ability to fill the gap, and
warned that a failure could have serious consequences.
"The government is unlikely to remove the price cap
introduced in May, meaning that the fuel shortages will continue
throughout Q3, further hurting the already faltering economy,"
said Malte Liewerscheidt senior analyst for Africa with UK-based
risk advisory group Maplecroft.
(Additional reporting by Felix Onuah in Abuja and Ron Bousso in
London. Editing by William Hardy)