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Tuesday, April 23, 2024

Nigeria’s Modular Refineries face shutdown threat due to forex crisis

Foreign Exchange Shortage Imperils Operations of Licensed Refineries, Stifling Fuel Supply

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Nigeria’s licensed modular refineries, tasked with augmenting the country’s fuel production, teeter on the brink of closure due to an acute shortage of foreign exchange, hampering their ability to procure crude oil, an essential input priced in United States dollars.

Amid a backdrop of economic turmoil, Nigeria boasts 25 licensed modular refineries with a collective capacity of 200,000 barrels of crude oil daily. Despite this potential, operational challenges loom large, exacerbated by the compounding effects of a foreign exchange crisis gripping the nation.

While Brent crude, the global benchmark, hovers around $80 per barrel, modular refineries grapple with the impossibility of purchasing crude oil in dollars while selling refined products in naira, exacerbating the strain on their operations.

Eche Idoko, Publicity Secretary of the Crude Oil Refinery Owners Association of Nigeria (CORAN), underscored the urgent need for policy intervention, highlighting the existential threat facing modular refineries in the absence of viable solutions to the forex conundrum.

Idoko emphasized the critical role of the government in alleviating the crisis, advocating for the sale of crude oil to refineries in naira to mitigate forex volatility and foster a more conducive operational environment.

Amid mounting concerns, Benneth Korie, President of the Natural Oil and Gas Suppliers Association of Nigeria (NOGASA), echoed Idoko’s sentiments, urging the government to peg the exchange rate at N750/$ to stabilize the market and facilitate seamless business transactions.

Additionally, Korie emphasized the ripple effects of the forex crisis on downstream operations, lamenting the uncertainty plaguing fuel pricing and distribution in a volatile market landscape.

As the standoff persists, the specter of dwindling fuel supplies looms large, casting a shadow over Nigeria’s energy sector and exacerbating concerns about economic stability in the face of mounting challenges.

Against this backdrop, stakeholders clamor for decisive action from policymakers, urging swift measures to salvage the ailing modular refinery sector and safeguard the nation’s energy security in the midst of a burgeoning forex crisis.

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