The oil giant Nigeria National Petroleum Company Limited (NNPCL) acknowledged on Tuesday that the sustainability of the petrol supply may be impacted by its financial difficulties.
This is after rumours circulated that it owed suppliers about $6 billion, it eventually admitted itself.
The reports states that supply agents have been hesitant to provide the merchandise.
Due to the situation, the oil giant was compelled to impose stock rationing and pressure big suppliers to maintain supply.
According to a major supplier over the weekend, no fewer than five tankers intended for Nigeria had declined to discharge petroleum to NNPCL out of fear of nonpayment.
It was discovered that the corporation needed more than the $300 million federal bailout to maintain the country’s petrol supply.
Desperate drivers in Lagos, Abuja and other cities had to wait for hours in queue yesterday since just a few petrol stations had the product available for end customers to dispense.
In many areas of Lagos, independent merchants profited from the situation by charging as much as N950 for a litre of petrol. In other states, it sold for more money.
The Federal Government appeared to be considering its options.
In a statement, Olufemi Soneye, the NNPCL’s chief corporate communications officer, acknowledged the financial difficulties.
“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.
“In line with the Petroleum Industry Act (PIA), 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,” Soneye said.
The Nation was informed by a source that the government had expressed worry.
“The Federal Government is already weighing options because of the security implications of acute shortage of petrol in the country.”
Soneye stated on Saturday that there was nothing unusual about the outstanding financial obligations and that transactions in the oil trading industry frequently take place on credit with sporadic outstanding sums.
He was responding to Reuters claims that most suppliers are “hesitant” to send in products because of the uncertainty surrounding the $6 billion payment.
As part of a syndicated $3.3 billion crude oil-backed prepayment facility, Afreximbank paid $925 million to NNPCL, according to the international news agency.
The only company importing petrol has been the NNPCL, working through supply agencies.
The NNPCL is “struggling to supply dealers due to shortage of product at its tanks”, a source confirmed at the weekend.
The source said: “Bulk sales of ships and trucks to depot owners have slowed down in the last five days due to a shortage of supply.
“No bulk sales had happened since Tuesday, which heightened the scarcity in the downstream sector.”
An oil executive with knowledge of industry affairs connected the eight-week fuel line delays “largely to the reduction in the supply of products by suppliers who were being owed.”
“I was aware that at some point in mid-August, the Federal Government had to come in by giving money to NNPC to defray some of the outstanding liabilities and boost the confidence of the suppliers to continue.
“However, what was paid was about $300 million which only helped in getting a reprieve for about a week before the queues fully returned,” he said.
Another source revealed that: “Suppliers of petrol are hesitant about supplying new products to the Nigeria National Petroleum Company Limited (NNPCL) due to piling debts.
“At present at least five vessels originally intended for supply to Nigeria have refused to discharge fuel to NNPCL due to fear of payment.
“The situation has increased pressure on the petroleum company which has now resorted to rationing the stock it has while appealing to its long-term suppliers not to halt supplies.”
Reuters said: “Nigeria’s debt to gasoline suppliers has surpassed $6billion – doubling since early April – as state oil firm NNPCL struggles to cover the gap between fixed pump prices and international fuel costs, under rising cost of living.”
According to the EPA, the corporation owes $4 billion to $5 billion in overdue payments for some imports from January for which it has not yet made payment.
“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.
The news agency said: “At least two suppliers already stopped participating in recent tenders after hitting self-imposed debt exposure limits to Nigeria, the sources said, meaning they will not send more gasoline until they receive payments.
“Nigeria’s tenders to buy gasoline in June and July were smaller, traders said. NNPC will import via tender about 850,000 tonnes in July, two of the sources said, down from the typical one million tonnes in previous months.”
The oil company asserted on 19 August that in order to guarantee that Nigerians have access to petrol at a consistent price, the government has been regulating the average retail price.
According to an arrangement with the government, the NNPCL has been offering PMS for retail distribution at around half of the landing cost in order to protect Nigerians from the volatility of oil prices around the world.
According to Umar Ajiya, the firm’s chief financial officer, the government and the company have a reconciliation arrangement that allows the corporation to make up for any difference between the landing price and sale price.
According to him, the business hasn’t given any money to marketers in the guise of a petrol subsidy in the previous eight or nine years.
Although the official price of petrol at the pump is approximately N600 per litre, the average cost of landing is roughly N1,200.
Senator Heineken Lokpobiri, the Minister of State for Petroleum (Oil), stated that in order to stop smuggling, the NNPC Limited needs to modify its pricing strategy for imported petroleum.
He also acknowledged that NNPCL faced financial difficulties in renovating and maintaining Nigeria’s old pipeline network.
The flimsy pipelines are vulnerable to vandalism, according to Lokpobiri. Speaking at the 2024 Energy and Labour Summit in Abuja, Lokpobiri claimed that one of the main reasons smuggling operations are fuelled by the selling of imported fuel below the landing cost.
He said: “If NNPC imports PMS and sells to marketers at perhaps N600 or below, there’s no way that smuggling can stop.
“When smugglers are taking the products outside the country, even if you put all the policemen on the road, they are Nigerians; you and I know the answer.
“These pipelines, some dating back to the 1960s and 1970s, are highly susceptible to vandalism and crude oil theft, which significantly impacts the nation’s oil revenue.
“The old, corroded pipelines, some of which date back to the 1960s and 1970s, are easily vandalised,” Lokpobiri explained.
