• Thursday, July 18, 2024
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BusinessDay

UPDATED: Queues resurface as NNPC incurs $6bn petrol payment backlogs

Five steps to enhance fuel economy of your car

…International traders back out

…Marketers confirm drop in supply

Long queues are snaking back at petrol stations across Africa’s biggest economy, raising fresh concerns about shortages as the Nigerian National Petroleum Company Ltd (NNPC) struggles with a staggering $6 billion petrol payment backlog.

BusienssDay’s findings showed NNPC owes around $6 billion to international traders for imported petrol as traders said the state-owned company is taking more days to make payment instead of within 90 days.

According to Reuters, NNPC’s mounting debt, which includes overdue payments exceeding $4 billion-$5 billion for January imports alone as several international petrol suppliers have ceased participating in recent tenders.

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“The only reason traders are putting up with it is the $250,000 a month (per cargo) for late payment compensation,” one industry source told Reuters.

The payment delays underscore the creeping return of fuel subsidies – scrapped in May 2023 – that sap NNPC’s cash for imports and what it can send to President Bola Tinubu’s government.

At least two suppliers already stopped participating in recent tenders after hitting self-imposed debt exposure limits to Nigeria, the sources said, meaning they will not send more gasoline until they receive payments.

NNPC’s suppliers, including international traders like Vitol, Mercuria and Gunvor as well as Nigeria-based trading houses declined to be named because they are not authorised to speak to the media. The trading firms declined to comment.

BusinessDay’s findings showed traders thrive in risky environments, but they place limits on how much credit they allocate per trade to avoid too much exposure on one borrower. These limits vary by company based on their size and where they operate.

As a result, Nigeria’s tenders to buy petrol in June and July were smaller, traders told Reuters.

NNPC will import via tender about 850,000 tonnes in July, two of the sources said, down from the typical 1 million tonnes in previous months.

The above development means Nigerians are once again facing long queues and petrol scarcity across major cities, according to findings by BusinessDay.

Reports indicated that queues have reappeared in Lagos, Abuja, and other major cities across the country.

The scarcity has led to a spike in petrol prices, with some stations reportedly selling fuel as high as N780 per litre – a significant increase from NNPC’s retail price of N580.

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At the NNPC, where the product was sold at N580/litre, there were long queues of motorists who spent hours waiting and fighting one another to buy fuel. As a result, black marketers made brisk business selling to willing buyers at higher prices ranging from N700 to N900.

On Thursday, only the Heyden filling station sold fuel in Ijegun Road, and there was a long queue of buyers.

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 FCT said that five litres of petrol was bought for 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 nearing the Banex bridge while NiPco and AA- Rano near it all have no fuel.”

Zarman Mustapha, vice president of the Independent Petroleum Marketers Association of Nigeria (IPMAN), who confirmed the development, told BusinessDay in a telephone interview that there is a drop in supply.

According to him, most of the depots that are supplying the retail outlets went out of stock, and marketers cannot get the product in most of the private depots that allocations usually come from.

He said: “So we have lots of trucks now waiting at the coastal depots to be loaded, at least for transportation to various retail outlets across the country. But for now, the supply situation seems to have some glitches, which I believe NNPC is doing everything possible to sort out.

“When asked how long the drop in supply will last, he said, “I don’t think it will last for long. It’s not so serious so it will last for maybe a week.

“We are all working hand in hand with the management and the government to see how best the supply is being sustained. In such a way that the crisis, scarcity is not going to hit hard on the common man.”

Tinubu announced an end to expensive fuel subsidies last year, allowing pump prices to triple. But state oil company NNPC capped pump prices shortly afterwards as citizens chafed under the rising cost of living.

Read also: Crude shortage threatens Dangote’s July petrol supply takeoff

According to the 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 naira 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 liters 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 in a timely manner and subsequently paused over corruption concerns,” the IMF said.

Despite being Africa’s largest oil producer, Nigeria imports most of its petrol needs because it lacks the refining capacity to meet domestic demand.

The hope is that when a 650,000 barrel-a-day oil refinery outside Lagos, owned by Aliko Dangote, Africa’s richest person, and one in Port Harcourt, controlled by NNPC come fully online that will change.