The Nigerian National Petroleum Company Limited (NNPCL) owes oil traders around $3 billion for imported petrol, according to a report by Reuters.
Reuters reported that the national oil company is, however, progressively clearing the overdue payments for the imported oil, although the pace of repayment has been relatively slow.
- “They are paying, but it’s slow,” one of the sources with knowledge of the matter said.
Five sources quoted by Reuters said that NNPC – the country’s main importer of petrol – was taking more than 130 days to make the payments instead of within 90 days.
The slow pace of payments points to the slow comeback of fuel subsidies, discontinued in May 2023, depleting the NNPC’s budget for imports.
In addition, sources within the oil industry told Nairametrics that escalating global gasoline prices and a declining naira are affecting NNPC’s import capabilities.
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The Effect of Rise in Global Oil Price
The most recent report indicates that the price of crude oil has surged to almost $90 per barrel, leading to significantly higher costs for the NNPCL while importing petrol into the country.
In February, the highest recorded market price for petrol in West Africa reached N1,229 per litre, which is 150% higher than the government’s price cap set in June, as per the pricing data from Argus Media.
The prices have decreased to approximately N912 per litre, yet this remains N295 higher than the capped price which is N617.
On their part, however, NNPCL has continually denied the payment of subsidy on imported petrol despite the global increase in the price of Brent Crude oil.
In October 2023, the Group Chief Executive Officer of the NNPC Limited, Mele Kyari, said no subsidy was being paid to oil traders.
According to him, the oil firm is only recovering the full cost from the products that they import.
- “I told you there’s no subsidy whatsoever, we are recovering our full cost from the products that we import. We sell to the market; we understand why the marketers are unable to import. We hope that they do this very quickly and these are some of the interventions the government is doing. There is no subsidy,” Kyari said.
The Dangote Refinery Effect
Meanwhile, Nairametrics reported that Dangote Refinery has started supplying the Nigerian domestic market with petroleum products such as diesel and aviation jet fuel.
Abubakar Maigandi, head of the Independent Petroleum Marketers Association of Nigeria, told Reuters that local oil marketers set the price at N1,225 ($0.96) per litre for diesel after securing a bulk purchase agreement, prior to adding their mark-up.
Also, the refinery is set to supply Premium Motor Spirit (PMS), popularly known as petrol, to marketers next month, May 2024, according to sources familiar with the matter.
- The refinery, with a processing potential of 650,000 barrels per day, is poised to be the biggest in both Africa and Europe upon achieving full operational status, which is expected either this year or the following.
- The Dangote refinery Is expected to significantly reduce Nigeria’s dependence on imported petroleum products.
- Nigeria, despite being the most populous country in Africa and its top oil producer, ironically imports almost all of its fuel.
- Primarily, this is attributed to the nation’s lack of sufficient refining infrastructure, a gap that the new refinery seeks to fill.
Calls and a text message sent to Olufemi Soneye, NNPCL spokesman, to provide clarifications on the debt were not responded as at press time.
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