…Suppliers unwilling to sell on further credit
…NNPC in financial strain- spokesman
…Price hits N1000/litre
Calls for the Federal Government to adopt a market-based pricing mechanism for the premium motor spirit (PMS), popularly called petrol, have grown louder as long queues persist at petrol stations across Africa’s biggest oil producer.
BusinessDay findings showed that the Nigeria National Petroleum Company (NNPC) Limited owes around $6 billion to international traders for imported petrol. Traders say the state-owned oil company is taking more days to make payment instead of within 90 days.
Further findings showed that NNPC’s mounting debt, which includes overdue payments exceeding $4 billion-$5 billion for January imports alone, has forced international petrol suppliers to cease participating in recent tenders.
The payment delays underscore the creeping return of fuel subsidies – scrapped in May 2023 – which sap the NNPC’s cash for imports and money that should be sent to President Bola Tinubu’s government.
A source who pleaded anonymity said the company is struggling to supply dealers due to a shortage of products at its disposal.
“Bulk sales of ships and trucks to depot owners have slowed down in the last five days due to a shortage of supply. No bulk sales have taken place since last Tuesday, resulting in the scarcity in the downstream sector,” the source said.
The NNPC on Sunday confirmed that it currently faces a financial strain due to the supplying cost of petrol, which it said is impacting supply sustainability.
Read also: Petrol price hits N1000/l as scarcity spreads
Olufemi Soneye, chief corporate communications officer, NNPC, stated that in line with the Petroleum Industry Act (PIA), the company remains dedicated to its role as the supplier of last resort, ensuring national energy security.
“We are actively collaborating with relevant government agencies and other stakeholders to maintain a consistent supply of petroleum products nationwide.
“NNPC Ltd has acknowledged recent reports in national newspapers regarding the company’s significant debt to petrol suppliers. This financial strain has placed considerable pressure on the Company and poses a threat to the sustainability of fuel supply,” the statement read.
The above development means Nigerians are, once again, facing long queues and petrol scarcity across major cities, according to findings by BusinessDay.
Reports indicate that queues have reappeared in Lagos, Abuja, and other major cities across the country.
At the PetroCam filling station in Agege area of Lagos State, one of our reporters observed on Saturday that petrol was being sold for N980 per litre.
Along the Oshodi Isolo road, our correspondent observed that a number of filling stations were under lock and key.
Ahmad Zakari, a civil engineer and resident of the Federal Capital Territory (FCT), said that five litres of petrol were purchased at N9,000 on Tuesday at Jabi Motor Park.
He added: “Today, we could not get petrol at all the usual filling stations around Jabi, Utako and Kubwa Expressway.
“Right now, Emadeb filling station on Ahmadu Bello Way has a long queue near Banex Bridge while Nipco and AA Rano near it all have no fuel.”
To change the narrative, experts have advocated housecleaning at the NNPC and market-based pricing that would naturally adjust to reflect supply and demand conditions.
Read also: Petrol scarcity persists despite NNPC’s claim of increased output, product sufficiency
Analysts say this housecleaning would be incomplete without reforms in how the national oil company conducts its business, manages finances and makes remittances to the federation account.
Aisha Mohammed, an energy analyst at the Lagos-based Center for Development Studies, argued that the removal of subsidies and strategic policy interventions/industry collaboration have the potential to reshape Nigeria’s energy landscape into a more sustainable space.
Charles Akinbobola, energy analyst at Alexxa Partners, said: “If you keep fixing prices below the market price, there will always be shortages. The government has to bite the bullet and let go of petroleum subsidies. Analysts say a truly commercial NNPC should operate in line with the provisions of the Companies and Allied Matters Act and lessen government interference.”
Oluseun Onigbinde, co-founder and CEO of budgIT, a Nigerian civic firm, said Nigeria is likely not going to make it without a strong technocratic core.
“The Obasanjo era is strong evidence for this argument,” Onigbinde said on his X account.
The NNPC sits upon Africa’s biggest oil and gas reserves, and at a time oil is heading for $80 per barrel, Nigeria’s production is below the 2024 budget benchmark of 1.7 million barrels per day and investors are fleeing the Niger Delta.
Read also: Nigeria’s Economic Growth Is Leaving Its People Behind
The NNPC has struggled with the albatross of fuel subsidy because it is saddled with the task of being the supplier of last resort. It assumed the role of sole importer because the retail price capped at the pump does not guarantee commercial returns to marketers who will pay a higher landing cost.
In the PIA, lawmakers named the NNPC the supplier of last resort, a description that implies national interests will always override its commercial interests.
This will allow it to leverage its assets to raise cash, fund its operations and attract investments similar to its Saudi Aramco and Abu Dhabi National Oil Company.
Section 53(1) of the PIA mandates the listing of the NNPCL within six months of incorporation.
“We are convinced that by the middle of next year, this company will be IPO-ready, which means that you have the system, processes, and a company that is accountable to its stakeholders and shareholders,” Mele Kyari, group CEO of NNPC, said in July 2022. But this is yet to happen two years later.
Tinubu announced an end to expensive fuel subsidies last year, allowing pump prices to triple. But the state oil company, NNPC Limited, capped pump prices shortly afterwards as citizens chafed under the rising cost of living.
According to the International Monetary Fund (IMF), Nigeria’s reintroduction of a gasoline subsidy months after it was scrapped is expected to guzzle almost half of its projected oil revenue this year.
The implicit subsidy will cost Africa’s largest crude producer an estimated N8.43 trillion of its projected N17.7 trillion of oil revenue, the IMF said in its latest report.
Its forecasts are similar to Bank of America’s, which projects it could cost Nigeria between $7 billion and $10 billion this year if it imports between 18 and 25 billion litres of petrol, Tatonga Rusike, BofA sub-Saharan Africa economist, wrote in a note.
“Fuel subsidies were reformed in June 2023, however, adequate compensatory measures for the poor were not scaled up promptly and subsequently paused over corruption concerns,” the IMF said.
