• Saturday, December 09, 2023
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NNPC halts crude oil swaps, imports petrol with cash

Oil firms to import own petrol as NNPC halts controversial crude oil swap that gained notoriety

For the first time in almost a decade, the Nigerian National Petroleum Company (NNPC) Limited has stopped the crude oil swap arrangement for petrol and begun utilising cash tenders to purchase fuel.

This shift, which is in accordance with President Bola Tinubu’s reform initiatives launched in May, aims to eliminate costly fuel subsidies and strengthen Africa’s largest oil-exporting nation’s financial stability.

Sources told Reuters that the state-owned oil company made this substantial adjustment in its most recent tender for acquiring petrol planned for delivery in November.

Read also: Fuel subsidy, exchange rate reforms to boost Nigerian economy – IMF
In addition, two of these sources have indicated that NNPC aims to settle the outstanding bills related with long-standing oil swaps by the end of the month.

The change is the outcome of President Bola Tinubu’s efforts to reduce costly gasoline subsidies as part of larger measures aimed at bolstering Africa’s largest oil exporter’s faltering finances.

NNPC remitted nothing to the government coffers last year, despite rising oil prices, because oil-for-petrol swaps devoured all the crude oil it had to sell – and more; NNPC owed merchants up to $3 billion in oil this year, according to two sources, and the debts would be reimbursed in November.

Tinubu’s reforms in May nearly quadrupled petrol prices and effectively eliminated cross-border smuggling, which was draining millions of litres per day out of Nigeria to neighbouring nations with higher pump prices.

While Nigeria produces more oil than any other African country, it refines little and relies nearly entirely on petroleum imports to keep its 200 million people moving.

More than a dozen consortia participated in the most recent round of swaps, including multinational oil dealers such as Vitol, TotalEnergies, and Mercuria, as well as local firms such as Sahara.

Read also: If NNPC has been transformed, its conduct must also change

Despite the reforms, insiders say the NNPC remains the sole importer of petrol due to chronic foreign exchange shortages and an effective pump price cap, which means private importers can’t make money bringing in fuel.