Nigeria’s falling crude revenues have forced NNPC Ltd to defer payments to fuel importers for 3 months.
This was disclosed in an interview by NNPC Ltd CEO, Mele Kyari to Bloomberg on Monday.
This comes as Nigeria increases its fight against crude oil theft, which has paralysed the country’s production ability. Kyari noted that the fuel trading companies NNPC has deferred payments to are: Vitol, Total, Sahara Group, and Oando.
What he said:
Kyari noted that dwindling crude output has forced NNPC to defer payments to some local gasoline suppliers by at least three months.
He added that NNPC swaps crude with international traders, including Vitol Group and TotalEnergies SE, as well as domestic groups such as Sahara Group Ltd. and Oando Plc.
However, as oil production dropped to less than 1.2 million BPD, local importers have been asked to permit payment delays of at least 90 days. Kyari added that the deal involves a longer credit period.
He also noted that he is confident that a rebound in Nigeria’s crude production will allow the company to cover its deferred payment obligations and expect Nigeria to add 500,000 barrels a day to its output by the end of November, mainly by restarting activities on the Forcados export terminal and Trans-Niger pipeline.
He stated: “We will meet all the deliveries and still have surplus crude production for cash. They know we can pay otherwise they wouldn’t supply.”
Kyari noted that the new contract operates alongside the original “direct sale, direct purchase” deals, under which NNPC is expected to provide crude before traders deliver the fuel.
“Those local firms accepting deferred payments receive an additional premium per ton of gasoline, according to people familiar with the arrangements. So far, the companies involved in those new contracts are Sahara, Oando, MRS Oil, and Duke Oil, a subsidiary of NNPC” the report noted.
What you should know
Nairametrics reported last week that Nigeria’s foreign reserves have fallen by $2.202 billion to $38.318 billion as of September 29, 2022, from $40.520 billion as of December 31, 2021. This is a 5.42% decrease in foreign reserves.
Despite rising oil prices this year, Nigeria’s foreign exchange reserves have been depleted by billions of dollars. The country’s reserves fell by $706 million last month, down from $39.024 billion on September 1, 2022.
Also recently, The Nigerian National Petroleum Company Limited (NNPC) disclosed that in its effort to fight rising crude oil theft, which has seen Nigeria’s average crude production fall to under 1 million barrels a day in August, it has so far shut down the operations of 395 illegal refineries, including discoveries of an illegal connection of four kilometers route into the sea running from its major Forcados line, which he estimates has been around for 9 years.
