Nigeria’s debt to petrol traders has surpassed $6 billion, doubling since early April, as the state oil firm, Nigerian National Petroleum Corporation (NNPC), struggles to cover the gap between fixed pump prices and international fuel costs, according to six industry sources.
This is according to a report by Reuters on Thursday, which tracks data on international petrol prices.
Sources confirmed to the American media outlet that NNPC has capped the pump prices of petrol shortly after the removal of subsidy in May 29, 2023.
The cap on fuel prices has resulted in stability at the pump despite increases in international crude oil prices and the devaluation of the naira against the dollar.
This situation has led many to speculate that the government might have reinstated some form of petrol subsidy, given the discrepancy between market prices and the steady price of the commodity.
According to data from Reuters, NNPC began facing difficulties early this year when late gasoline payments exceeded $3 billion.
The company has yet to pay for some January imports, with traders stating that the late payments now amount to between $4 billion and $5 billion.
Under the terms of their contracts, NNPC is required to pay within 90 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.
At least two suppliers have already stopped participating in recent tenders after reaching their self-imposed debt exposure limits to Nigeria, the sources said.
This means they will not send more gasoline until they receive payments.
The tension to reconcile the international landing cost of petrol and the fixed price of N617 has deepened the debt of NNPC to the traders, the sources confirmed.
New Projection of Subsidy in 2024
While the federal government has repeatedly denied the payment of any subsidy on petrol, a report submitted to President Tinubu by the finance minister, Wale Edun, and seen by Nairametrics showed the government’s projection on subsidy.
According to the report, fuel subsidy is projected to gulp about N5.4 trillion in 2024 as against the N3.6 trillion budgeted for the same intervention in 2023.
The finance minister, Edun, told reporters also that subsidy removal is an ongoing process, suggesting that a complete removal is not yet achieved.
“It is an ongoing conversation, it is an ongoing process of ensuring that fuel subsidy that fuel subsidy is eliminated from the Nigerian economy, that is what Mr. President intent is and that is what is being worked towards,” Edun said in an interview May.
What you should know
- The removal of fuel subsidy has been a contentious issue for some months as crude oil prices increase and the exchange rate continues to depreciate, leading critics to suggest partial subsidy remains despite talk of a removal.
- Several observers maintain that the federal government has restarted the subsidy on petrol since its removal on May 29, 2023.
- The Special Adviser to the President on Energy, Mrs. Olu Veŕheijen, said that the Federal Government reserves the right to pay fuel subsidy intermittently to cushion hardship in the country.
- On its part, however, NNPC has insisted that no subsidy is paid to its account from the federal government.
- Addressing the issue in August 2023, the GCEO of the oil firm, Mele Kyari, stated that the company is only recovering the cost of import, adding that the federal government hasn’t paid a subsidy since May.
