As the Nigerian National Petroleum Company Limited struggles to close the gap between fixed pump prices and international fuel costs, Nigeria’s debt to suppliers of Premium Motor Spirit, also known as petrol, has surpassed $6 billion, doubling what it was since early April, six industry sources told Reuters.
The NNPC quickly refuted this on Thursday, however, the Reuters story claimed that the national oil firm started having problems early this year when late PMS payments exceeded $3 billion.
According to merchants, the corporation has yet to pay for certain imports from January, with the outstanding payments totaling between $4 billion and $5 billion. NNPC is required by contract to make payment within ninety days of delivery.
“The only reason traders are putting up with it is the $250,000 a month (per cargo) for late payment compensation,” one industry source said.
According to the sources, at least two suppliers have already withdrawn from current tenders after reaching their self-imposed debt exposure restrictions to Nigeria. This means that they won’t provide any more PMS until they are paid.
Risk-taking conditions are favourable to traders, but they set restrictions on the amount of credit they lend out for each deal to prevent taking on too much debt from a single borrower. Depending on the company’s size and operating location, these limitations differ.
Nigeria issued fewer tenders to purchase petrol in June and July as a result, according to dealers. According to two of the individuals, NNPC will import roughly 850,000 tonnes through tender in July, as opposed to the usual one million tonnes in prior months.
However, Olufemi Soneye, the NNPC spokesperson, called the assertions made by merchants as detailed in the report “false,” according to PUNCH.
In May of last year, President Bola Tinubu declared an end to costly gasoline subsidies, which caused pump prices to quadruple. But soon after, when residents became irritated with the rising expense of living, NNPC set a price cap on petrol pumps.
Industry observers claim that the cap and the naira currency collapse allowed the subsidy to slowly reappear, despite NNPC’s denials.
For years, critics of the subsidies, including NGOs and government officials, have denounced it as inefficient and dishonest. But given the current state of the expense of life, Nigerians, who receive minimal government services, have long considered access to cheap petrol as a right.
Deadly riots this week caused Kenya’s indebted government to revoke proposed tax increases, casting doubt on other attempts to cause additional suffering to citizens already hurt by rising prices.
Senegal’s energy subsidy bill is still substantial, accounting for 3.3% of GDP, and Angola and Egypt are also attempting to reduce subsidies in order to strengthen their own economies.
Nigeria, the biggest oil exporter in Africa, imports almost all of its fuel since its state-owned oil refineries have been neglected for many years. Although it has not yet produced commercial petrol, the recently opened 650,000 barrel-per-day Dangote refinery is exporting other fuels.
Decades of oil money have been consumed by corruption and excessive spending, leaving the country with little savings to fall back on. The cash-strapped NNPC has also limited what it can sell for cash by mortgage lending a large portion of its spot oil cargoes.
To support the nation’s foreign exchange, NNPC obtained its largest-ever oil-backed loan in late 2023, totaling $3.3 billion, from Afreximbank and a group of traders, including Gunvor.
