Forex scarcity threatens Dangote Refinery as chinese refuse to release crude oil

Cargo belonging to Chinese state energy major PetroChina, has been waiting to unload a cargo of US crude at Nigeria’s giant Dangote refinery for nearly a month due to payment issues, according to Reuters, quoting four trading sources and its tracking of shipping data. The impasse, it said, highlights difficulties the $20 billion plant funded by Africa’s richest man, Aliko Dangote, faces in its aim to be the biggest refinery on the continent and in Europe when it reaches full capacity this or next year. Nigeria has had severe dollar illiquidity for a while as its foreign exchange earnings from crude oil dwindled due mainly to its inability to raise crude oil production. Dangote aims to reverse the trend by which the oil-rich country exports its crude but almost totally relies on imports of fuel and other refined products. The 2-million-barrel West Texas Intermediate (WTI) crude cargo shipped by PetroChina onboard supertanker Maran Mira has, however, been floating off Nigeria since March 28, shipping data on LSEG and Kpler showed. The completion of the oil sale from PetroChina to Dangote has been delayed as the refinery has yet to issue a letter of credit to the Chinese trader, one source familiar with the matter told Reuters. A letter of credit is the most common form of trade finance. A buyer’s bank sends a letter to the seller’s bank guaranteeing payment to the seller once goods arrive. PetroChina was also not keen to receive oil products as payment, one of the ways that Dangote has been paying for its crude, the source said. Two of the sources also told Reuters that the refinery has had difficulty accessing dollars through the Nigerian government, with the naira’s slide against the US dollar as global oil prices have risen straining Nigeria’s finances. The government did not immediately respond to a request for comment and a Dangote executive did not directly address the issue in comments to Reuters. PetroChina has another 2 million barrels of WTI crude onboard supertanker Kondor that is making its way to Nigeria, according to another source and LSEG shiptracking data./Oseni Rufai


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