NIGERIA’S state-owned oil company, NNPC, is entangled in a significant debt of almost $3bn owed to fuel traders for imported petrol, a consequence of the depreciating naira and escalating global fuel prices, sources have disclosed.
‘They are paying, but it’s slow,’ one source familiar with the matter told Reuters, indicating that NNPC was taking more than 130 days to make payments instead of the usual 90-day timeframe.
An NNPC spokesperson responded by stating, ‘Our focus remains on sustaining sufficiency in the supply of petroleum products in Nigeria,’ while also expressing unawareness of any substantial debt or financial issues of similar magnitude.
Fuel traders supplying NNPC, including international firms like Vitol, Mercuria, and Gunvor, alongside local trading houses, continue their operations despite the payment delays. However, these entities declined to comment on the situation.
The resurfacing of payment delays underscores the gradual resurgence of fuel subsidies, abolished in May 2023, constraining NNPC’s financial capacity for imports and its ability to contribute to President Bola Tinubu’s administration.
Nigeria’s historical practice of subsidising fuel aimed to maintain affordable pump prices. However, Tinubu’s removal of subsidies as part of broader reforms resulted in a tripling of prices, leading to a decline in petrol consumption by about 30 percent as higher prices curbed smuggling to neighbouring countries.
To address public concerns amid soaring inflation, the government implemented a cap on pump prices at a nationwide average of 617 naira per litre in June.
Nigeria’s reliance on fuel imports, due to years of mismanagement and underinvestment in state-owned oil refineries, exacerbates the challenges faced by NNPC.
Recent disruptions in fuel supply, evidenced by queues at petrol stations in Lagos, were attributed to logistical issues over Easter, according to Clement Isong, head of the Major Oil Marketers Association.
Rising global gasoline prices, coupled with a weakening naira, have further strained NNPC’s ability to import fuel, leaving it as the sole importer for the country’s daily consumption of approximately 40 million litres.
The International Monetary Fund has cautioned that maintaining capped pump prices and electricity tariffs below cost recovery levels could shave off up to 3 percent of Nigeria’s GDP in 2024. Analysts urge the government to devise a strategy for subsidy removal when conditions permit.