‘How FOREX illiquidity on I&E window disrupts petrol importation’
By Tunde Shorunke
Foreign exchange (FOREX) illiquidity in the Investor and Exporter (I&E) FX window has continued to disrupt the importation of Premium Motor Spirit (PMS), otherwise called petrol.
In fact findings, Daily Times discovered that the illiquidity of FOREX is attributed to the inability of the dollar to be traded (bought/sold) on Naira demand, in this instance, available liquidity of financial institutions is not available to import petrol into the country.
Speaking with The Daily Times, a top bank official who does not want to be named, said: 0”As everybody knows, there’s scarcity of foreign exchange on the I&E window and it is quite severe for oil marketers to import petrol into the country.
“For oil marketers to import PMS into the country, they will have to go to the bank and ask them to open a letter of credit, this letter of credit is used to be negotiated in dollars for the supply of the product to be paid.
“Right now, there is no assurance that FOREX will be available which is why Nigeria National Petroleum Corporation (NNPC) is the sole importer of PMS, and they are able to do that because the government has an agreement called the DirectSales-Direct-Purchase (DSPD) program.
The DSDP program is subsidized which makes the country not to be benefiting more on the maximum price of crude oil.”
Further speaking on I &E window funding, he said, “The funding of the I&E window is not from the CBN alone. For instance, if a foreign investor wants to buy shares on the Nigeria Stock Exchange (NSE) such a person will bring in their funds to sell on the I&E and then use the naira to buy shares or to buy government debt instruments.
“But now because foreign investors do not have the flexibility to exit the market as far back as March according to Bloomberg, they are still stuck in the country because there’s no FOREX that they can buy to exit.
“On the CBN side, they can only have more dollars if they earn more dollar revenue from oil, though the BDC market is not much of a problem because the CBN can conveniently fund them but PMS import is in the rage of $7-8million for a cargo,” he added Similarly, the Executive Secretary of Major Oil Marketers Association of Nigeria (MOMAN), Clement Isong, in an exclusive interaction with The Daily Times, noted that the inability of FOREX liquidity on I & E window is the major reason why oil marketing companies are incapacitated to import Premium Motor Spirit (PMS) into the country.
“CBN is only making dollars available to Bureaux De Change (BDCs) which means they are making dollars strictly available to people who are travelling, for people to exchange physical dollars for physical naira.
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“For importers of petroleum products, it is not the physical dollar we use. It’s an electronic transfer with a process we apply through our banks for the dollar that we use to pay for the product we’re importing.
“The BDC’s deals with physical dollars which is not what we importers use but ours is an electronic transfer which is made available on the Investors & Exporters Foreign Exchange window (I & E window), but the I &E window is illiquid because there’s no money there.
Which is why marketers cannot import and the I&E window which the dollar is supposed to be trading at about $389 per dollar has no dollar to be traded for.”
