There are indications that the pump price of premium motor spirit, popularly known as petrol, may rise in filling stations as the Nigerian National Petroleum Company Limited finally admitted that it was facing challenges due to a $6bn debt.
After weeks of denial, the NNPC admitted on Sunday that it owed its petrol suppliers the sum of $6bn, saying it was facing financial strains due to petrol supply costs.
In a statement by its Chief Corporate Communications Officer, Olufemi Soneye, the state-owned energy company subtly confirmed that the debt was the reason for the fuel queues in filling stations across the country, stating that it is impacting supply sustainability.
It was reported in July that Nigeria’s debt to suppliers of petrol surpassed $6bn, making the NNPC struggle to cover the gap between fixed pump prices and international fuel costs.
A Reuters report stated that the national oil company began struggling early this year when late PMS payments surpassed $3bn.
The company had still not paid for some January imports, traders said, and the debt keeps piling up. Under contract terms, NNPC is meant 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.
Since June, Nigeria’s tenders to buy PMS were smaller, traders said.
From two in July, three more traders were said to have stopped supplying PMS to the NNPC as of now, making a total of five unpaid traders.
But Soneye, in August, denied that the NNPC owed international oil traders $6.8bn.
“NNPC Ltd does not owe the sum of $6.8bn to any international trader(s). In the oil trading business, transactions are carried out on credit, so it is normal to have outstanding amounts at certain times. However, NNPC Ltd, through its subsidiary NNPC Trading, maintains many open trade credit lines with several traders. The company is fulfilling its obligations on a first-in-first-out basis,” he stated.
The NNPC has given various reasons for the lingering fuel crisis, including bad weather and the inability of vessels to discharge, among others, but none of the measures it has taken stopped the queues at the filling stations.
On Sunday, the company made a U-turn in admitting that it was facing financial constraints.
“NNPC Ltd has acknowledged recent reports in national newspapers regarding the company’s significant debt to petrol suppliers.
“This financial strain has placed considerable pressure on the company and poses a threat to the sustainability of fuel supply,” Soneye said in a statement titled, ‘NNPC Ltd Faces Financial Strain Due to PMS Supply Costs, Impacting Supply Sustainability.’
He added that the company was collaborating with relevant government agencies and other stakeholders to maintain a consistent supply of petroleum products nationwide.
“In line with the Petroleum Industry Act, NNPC Ltd remains dedicated to its role as the supplier of last resort, ensuring national energy security.
“We are actively collaborating with relevant government agencies and other stakeholders to maintain a consistent supply of petroleum products nationwide.”
As Nigerians continue to complain over the lingering fuel crisis since July, the sudden admission by the NNPC of a claim it had severally denied, fuelled speculations that the Federal Government might stop paying what it termed “under-recovery” or shortfall on imported petrol.
The company is said be contemplating taking the only way out of the debt challenges, which was to stop paying shortfalls that might no longer be sustainable.
When this happens, operators said the price of petrol would rise above N1,000 and interested accredited marketers would be able to import petrol, thereby removing the NNPC monopoly.
FG pays subsidies
Recently, the NNPC, being the sole importer of petrol, admitted that the Federal Government subsidised the current price of PMS, which the marketers recently put at N1, 117 per litre.
Though the NNPC denied paying fuel subsidies to marketers in the last nine years, it said the government allowed it to sell at a price below the landing cost.
The Chief Financial Officer of the company, Alhaji Umar Ajiya, stated this in Abuja when the company presented its 2023 report.
“In the last eight to nine years, NNPC has not paid anybody a dime as subsidy; no one has been paid a kobo by NNPC in the name of subsidy. No marketer has received any money from us by way of subsidy.
“What has been happening is that we have been importing PMS, which has been landing at a specific cost price, and the government tells us to sell it at half price. So, the difference between the landing price and that half price is a shortfall.
“And the deal is between the Federation and NNPC to reconcile. Sometimes, they give us money, so there is no money exchanging hands with any marketer in the name of subsidy,” he said.
He stated that credit lines were prevalent in downstream businesses based on the worldwide commercial system.
He added that the company was in an open credit agreement with PMS suppliers in the past, with term-line contracts for payment.
Also, Dapo Segun, the Executive Vice President of Downstream at NNPCL, said that establishing an open credit agreement with suppliers spoke volumes about the credibility the national oil company had built over time.
“Concerning the outstanding to the suppliers, it is not in that magnitude that has been put out, it is lower than the $6.8bn
“What really matters is the relationship between us and our suppliers to ensure that we keep faith in making these payments to our suppliers, which we have done over time.
“You would understand that it is not a static figure, and I wouldn’t want to quote any figure. When we make payments, it goes down, and when they supply products, it goes up. It is a dynamic way, but the most important thing is to ensure that we continue to make PMS available across the country,” he said.
According to the NNPC, being the only importer of petrol, the Federal Government pays it to sell fuel to Nigerians at a subsidised rate.
