Oil & Gas
Petrol scarcity set to bite harder as NNPCL admits $6bn debt to suppliers
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.
In July 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 PUNCH learnt that the company might 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.
However, this has led to incessant fuel scarcity across the nation as the debt to the international oil companies keeps piling up.
On May 29, 2023, President Bola Tinubu, announced that the fuel subsidy was gone.
However, with the floating of the naira, the price of imported petrol rose above the purchasing power of an average Nigerian, causing the Federal Government to intervene by capping the price below the landing cost and paying the shortfall.
The failure of the Federal Government to pay the shortfall is impacting fuel importation.
In May, the International Monetary Fund warned the Nigerian government to remove what it called implicit fuel and electricity subsidies.
In a report published by the IMF, the organisation told Nigeria that the subsidies would guzzle 3 per cent of the nation’s Gross Domestic Product in 2024 as against 1 per cent in the year before.
According to the report, the IMF commended the Federal Government for, among other things, phasing out “costly and regressive energy subsidies”, saying this was critical to creating fiscal space for development spending and strengthening social protection while maintaining debt sustainability.
IMF noted after Tinubu removed subsidy, “adequate compensatory measures for the poor were not scaled up in a timely manner and subsequently paused over corruption concerns. Capping pump prices below cost reintroduced implicit subsidies by end-2023 to help Nigerians cope with high inflation and exchange rate depreciation”.
It appears the Federal Government is now ready to heed the advice of the IMF.
‘Partial deregulation killing’
The National Vice Chairman of the Independent Petroleum Marketers Association of Nigeria, Hammed Fashola, has charged the government to either return the fuel subsidy or remove it totally instead of engaging in partial deregulation.
“The Federal Government and the NNPC should just do this thing once and for all. If they want to deregulate, let them deregulate fully, because we know where we are going; that’s why you’re seeing this disparity whereby the NNPC retail is selling at N580 in Lagos and independent marketers will be selling at N800. You can see the gap. It’s killing our business, we are not making progress; it’s killing us.
“If the Federal Government wants to bring back the subsidy, let them bring it back fully so that everybody will know that we are on subsidised product; and it should cut across, not just for NNPC Retail. So, we will know that we are back to the subsidy regime which I don’t think is good for the economy of the country,” Fashola emphasised.
He stated that the price disparity is not good for the image of independent marketers, saying the masses do not understand why they sell at higher rates.
“If not that we are trying to educate people, many see us as bad people, they didn’t know it’s not our fault,” he posited.
The IPMAN leader added that the fuel crisis was because the NNPC has remained the only importer of PMS.
“The problem is that it’s only the NNPC that can bring this product because of forex. They are the only ones selling. Two or three independent marketers once tried to import, but they could not,” he stated.
The marketers submitted, “We need to brace up and face the reality once and for all. If the subsidy should go, let it go so that all of us will be operating on a level playing ground. That’s what we are asking for, not that NNPC Retail will be favoured and others will be suffering, and people will be seeing us as Shylock businessmen; it is not too good,” Fashola stressed.
As the fuel crisis lingers for about two months, our correspondent observed that the price keeps rising in filling stations owned by independent marketers.
From less than N700 in July, a litre of petrol rose gradually to above N900 in most filling stations in August ending. The upward trend continues with no successful attempt to stop it as of today.
“I just bought a litre of petrol for N980 in Ogere,” a visibly angry bus conductor told a passenger negotiating transport fare along the Lagos-Ibadan Expressway.
In filling stations being run by major marketers like NNPC Retail, Mobil, MRS, Conoil, Ardova, and TotalEnergies, the product sells below N700, but with long queues of motorists struggling to buy fuel.
It was also observed during the weekend that many of these major marketers, including the NNPC, run skeletal services due to inconsistent fuel supply.
The NNPC spokesman, Olufemi Soneye, on different occasions that the queues being experienced in fuel stations across the country would be over in a few days.
However, the promises have continued to fail, leaving Nigerians in the struggle for energy security, especially in the transport sector.
Meanwhile, a depot operator told our correspondent that the desperation of marketers to get PMS should be blamed for the rise in price.
The operator, who did not want his name in print, told us that many of the marketers struggle to outplay one another and are ready to buy at any price for they know they can sell at a higher price to make a profit.
Nonetheless, the operator submitted that the lack of enough supply is responsible for the desperation, saying a number of depots have been out of stock for weeks.
“Most time it is not the depot owners that hike the price, but the marketers struggling to outplay each other at the depots,” the source stated.
Our correspondent learnt that some individuals who act as middlemen between the depots and the filling stations sell to the highest bidders only, leaving out those who could not afford the bidding.
These middlemen, it was learnt, make profits just by negotiating prices with the filling stations through phone calls.
Meanwhile, another depot source told our correspondent that loading of fuel has improved during the weekend, expressing optimism that things would improve this week.
“Loading was better over the weekend. It is expected that the supply will get better. We loaded from Saturday till Sunday. We are hopeful the fuel situation will improve this week,” the source disclosed.
However, our correspondent reports that the purported improved loading of fuel has not been felt by Nigerians who still pay higher rates to buy fuel.
Our Findings showed that the cost of transportation had risen by almost 40 per cent, depending on the destination.
As the landing price undergoes a significant revision, Nigerians will face a new petrol pump price across the country.
Dangote Refinery has made a significant announcement regarding its pricing strategy by deciding to cease the sale of petroleum products in Nigerian naira.
As a major player in the oil and gas sector, this decision may have wider implications for the market, including fluctuations in fuel prices and impacts on consumers and businesses reliant on stable petroleum costs. Continue Reading.
2027: 91 new political parties emerge as Tinubu searches for Yakubu’s replacement
The price of importing premium motor spirit, commonly referred to as petrol, into Nigeria has risen to N885 per litre, an increase from the N797 per litre recorded just last week.
The Major Energy Marketers Association of Nigeria (MEMAN) confirmed this rise in its daily energy bulletin released on Wednesday. This marks an increase of N88 per litre within a week.
With this increase, petrol prices at filling stations may soon go beyond N1,000 per litre, up from the current range of N940 to N970 per litre.
Currently, the landing cost of petrol stands at N797 per litre, while Dangote Refinery’s ex-depot price is N815 per litre. This has resulted in retail prices at MRS filling stations in Lagos and Abuja ranging from N860 to N880 per litre.
2027: More trouble for El-Rufai as SDP disowns former Kaduna governor
Truth or Dare: Businesswoman Aisha Achimugu declared wanted by EFCC
The Nigerian National Petroleum Company Limited has made a reduction to its ex-depot price of Premium Motor Spirit, commonly known as petrol, decreasing it from N1,020 to N899 per liter.
This decision, coming days after the Dangote Refinery reduced its price to N899, was confirmed by the Petroleum Products Retail Outlets Owners Association of Nigeria in a statement released on Saturday.
The statement signed by the association’s National Public Relations Officer, Dr Joseph Obele, and quoting a document released by NNPCL’s Commercial Department indicates a reduction based on the regional pricing scheme.
The price indicated that marketers would buy the product at N899 per litre, matching the price offered by the Dangote refinery a few days ago.
Marketers purchasing from Warri, Oghara, Port Harcourt and Calabar will, however, pay N970 per litre to offtake products.
The statement read, “The Nigerian National Petroleum Company Limited has taken a significant step in response to the competitive impact of deregulation in the downstream sector.
“The company recently reduced the ex-depot price of Premium Motor Spirit from N1,020 to N899 per litre.
“The price reduction by NNPCL is seen as a response to the competitive impact of deregulation, which has led to increased competition in the downstream sector.”
Obele noted that the price reduction by the national oil firm is seen as a response to the competitive impact of deregulation, which has led to increased competition in the downstream sector.
He also expressed optimism that PMS prices will drop further before the end of January 2025, given the global decline in crude oil prices and the naira’s recent gain against the dollar.
Obele described the trend as a price war while he emphasized that the price reduction by Dangote Refinery and NNPCL demonstrates the benefits of competition and advocates for the immediate privatization of government-owned refineries.
The move is expected to spark a price war among oil marketers, ultimately benefiting consumers.
However, the NNPCL spokesperson, Femi Soneye, is yet to confirm this development.
Reacting to this development, the National President of PETROAN, Billy Harry, said the price reduction is a welcome development that will bring relief to motorists and Nigerians during the holiday season.
He said, “The reduction in PMS price by NNPCL is a demonstration of the company’s commitment to making petroleum products more affordable for Nigerians.
“We commend NNPCL for responding to our call for affordable PMS prices.”
He also listed the benefits of the price reduction to consumers, including “Reduced transportation costs: With lower PMS prices, motorists will spend less on fuel, leading to increased disposable income.
“Increased economic activity: Lower fuel prices will stimulate economic growth by reducing production costs and increasing demand for goods and services.
“Improved standard of living: The price reduction will lead to a decrease in the cost of living, enabling Nigerians to afford necessities and enjoy a better quality of life.”
Harry also commended Dangote Refinery for its earlier price reduction, which he said had helped to stimulate competition in the downstream sector.
The PETROAN national official also hinted at a report submitted by PETROAN’s technical pricing team, warning that competitive pricing can lead to compromised product quality.
He further urged the Nigerian Midstream and Downstream Petroleum Regulatory Authority to ensure compliance with quality assurance standards.
“PETROAN is calling on the Nigerian Midstream and Downstream Petroleum Regulatory Authority to ensure compliance with quality assurance standards which may arise due to competitive pricing,” he added.
Heineken Lokpobiri, minister of state for petroleum resources (oil), says Nigeria will conform with the production quota set by the Organisation of Petroleum Exporting Countries (OPEC).
On June 2, OPEC extended Nigeria’s production quota of 1.5 million barrels of crude per day (bpd) to 2025.
OPEC said Nigeria should maintain the production level till December 31, 2025.
The oil cartel increased Nigeria’s production level to 1.5 million bpd for 2024 at its ministerial meeting on November 30, 2023.
However, Nigeria has been producing below the quota.
Speaking after OPEC’s 56th joint ministerial monitoring committee (JMMC) on October 2, the minister said Nigeria remains fully committed to the objectives of the body’s declaration of cooperation (DoC).
“Nigeria remains fully committed to the objectives of the DoC, and I can confidently confirm that our country is in conformity with the agreed production limits,” he said.
“While we continue to ramp up production in line with our national interests, we are doing so within the framework of OPEC’s guidelines, as we remain committed to balancing responsible production with our economic goals, and continue to meet our obligations under the DoC.”
OPEC RETAINS PRODUCTION OUTPUT POLICY
At the meeting, the oil cartel and its allies, known as OPEC+, retained its oil output policy, including a plan to start raising output in December.
According to a statement by OPEC, the group reviewed the crude oil production data for the months of July and August 2024 as well as current market conditions.
“During the meeting, the Republic of Iraq, the Republic of Kazakhstan, and the Russian Federation confirmed that they had achieved full conformity and compensation according to the schedules submitted for September,” the oil cartel said.
OPEC said the three countries reiterated their resolve to maintain full conformity and compensation throughout the remaining period of the agreement.
Final estimates of September’s crude oil production levels, according to the oil cartel, would be based on authorised secondary sources that would be accessible by the second week of October.
The oil alliance added that it will provide production figures for the nations that are part of the declaration of cooperation (DoC).
“The committee noted the three separate technical workshops between representatives from the Republic of Iraq, the Republic of Kazakhstan, and the Russian Federation and the secondary sources,” OPEC said.
“The meeting was aimed at discussing September production details and submitting their revised compensation plans that include the August overproduction as per the submitted plans to the OPEC Secretariat while also emphasising the need for some members to make further cuts to compensate for overproduction.
“The JMMC emphasised the critical importance of achieving full conformity and compensation. It will continue to monitor adherence to the production adjustments agreed upon at the 37th OPEC and non-OPEC Ministerial Meeting (ONOMM) held on 2 June 2024.
“The Committee will also continue to monitor the additional voluntary production adjustments announced by some participating OPEC and non OPEC countries as agreed upon in the 52nd JMMC held on 1 February 2024.”
Furthermore, according to OPEC, the committee would continuously assess market conditions.
OPEC said the next meeting of the JMMC is scheduled for December 1, 2024.
Petroleum marketers have raised an alarm that the Nigerian National Petroleum Company Limited, NNPCL, portal used for the purchase of Premium Motor Spirit (Petrol) has been shut down against dealers, making it impossible to apply for the commodity.
The spokesperson of the Independent Petroleum Marketers Association of Nigeria, Chinedu Ukadike disclosed this in a statement on Wednesday.
According to him, marketers have more than 2,000 pending tickets for the purchasing of 45,000 liters of petrol.
He hinted that the situation may lead to another round of fuel scarcity nationwide.
“I can’t confirm the price now because the portal is still shut down.
“We have more than 2,000 tickets for 45,000 liters (of petrol). That is 45,000 multiplied by 2,000, you can now know the number of million liters it will be. This is just an estimate, you know I don’t work with NNPCL and I don’t know what is on their system,” Ukadike stated.
He added that a 45,000-litre truckload of PMS is around N39.5 million, making N79 billion when multiplied by 2,000.
Reacting to the development, the spokesperson of NNPCL, Olufemi Soneye admitted that the state-owned firm has a significant backlog to address.
He said that the portal closure was intended to prevent the company from holding marketers’ funds for an extended period.
Soneye assured that the portal would soon be reopened; however, he failed to state the date when it would happen.
“We have a significant backlog to address. The closure is intended to prevent us from holding marketers’ funds for an extended period,” Soneye had explained.
“It will be reopened once the backlog has been sufficiently reduced. We are working to address it as soon as possible,” he stated.
The development comes as Nigerians struggle with high energy costs.
Recall that NNPCL in September 2024 announced a fresh price increase for petrol nationwide after lifting the product from Dangote Refinery.
Nigerians currently buy petrol between N950 and N1,100 per liter nationwide.
The import of Automotive Gas Oil (Diesel) into Nigeria increased by 22.66 percent to 4.94 billion liters in 2023 from 4 billion liters in 2022.
The National Bureau of Statistics disclosed this in its latest Petroleum Products Distribution Data released recently.
The data also showed that 109.39 million liters of Diesel were locally produced in 2023, compared to 102.47 million liters reported in 2022.
This represents a 6.76 percent growth rate in locally produced diesel in Nigeria.
Comparatively, Nigeria heavily depends on the import of diesel to meet its consumption demand based on the NBS data for 2023.
On the other hand, the Data also showed that the import of Premium Motor Spirit (petrol) dropped 13.77 percent to 20.30 billion liters in 2023 compared to 23.54 billion liters in 2022.
Recall that in April 2024, Dangote Refinery commenced the domestic sale of diesel in Nigeria.
The Nigerian National Petroleum Company (NNPC) is prioritising supplying naira-denominated crude oil to the Dangote Refinery in the first phase of a naira-for-crude scheme, a development expected to positively impact the domestic fuel supply chain and enhance transparency.
Oil transactions in Nigeria are often conducted in US dollars, given the international nature of the oil market and the global reliance on the dollar for such trade.
However, the Federal Executive Council recently adopted a proposal by President Bola Tinubu to sell crude to Dangote refinery and other upcoming refineries in naira.
The federal cabinet approved that the 450,000 barrels meant for domestic consumption be offered in naira to Nigerian refineries, using the Dangote refinery as a pilot. The exchange rate will be fixed for the duration of this transaction.
Eche Idoko, publicity secretary of CORAN said the federal government had promised to only supply crude oil to the Dangote refinery as it was the “only refinery producing petrol”.
“We were present at the inaugural meeting where the federal government did make us understand that they would want to start the naira sales in phases. That they would start with refineries that are producing PMS first and extend it to other refineries and that’s where they are right now and we can say the first phase of the naira sales will start in October,” Idoko said.
“No other refinery (apart from Dangote refinery) is selling petrol at the moment but I know that there are other refineries working on their plants that would be producing petroleum like the Clairgold refinery which intends to produce PMS.
“There is also Aradel which is working on their PMS plant. There is also Azikel Petroleum Refineries, which is also working on producing PMS.
“The last I heard with respect to that arrangement, the October date still remains and we have spoken with people at Dangote and they said conversations are ongoing.”
However, he said the details of the transactions would be made known when the federal government makes the announcement.
“For instance, are they going to discounts as in the normal practice when you are selling crude to the international traders? If there is going to be a discount, that is what will guarantee the reduction in price of petroleum products,” Idoko said.
“We also want to know at what rate is the exchange rate pegged. Is the federal government intending to maintain the N1,600 exchange rate?”
He said Nigerians would know the potential price of petroleum products when all the details are unveiled.
On September 13, 2024, the Technical Sub-Committee on Domestic Sales of Crude Oil in Local Currency announced that the Federal Executive Council under the leadership of President Bola Tinubu approved the sale of crude to local refineries in naira and the corresponding purchase of petroleum products in naira.
“From October 1, NNPC will commence the supply of about 385kbpd (385,000 barrels per day) of crude oil to the Dangote refinery to be paid for in naira,” the committee had declared.
The chairman of the Technical Sub-Committee is Zacch Adedeji, who doubles as chairman of the Federal Inland Revenue Service.
Dare Adekanmbi, the special adviser on media to the FIRS Chairman told Journalists that the committee is working day and night to ensure that things go according to plans.
The panel explained in September that this initiative would help reduce pressure on the naira, eliminate unnecessary transaction costs, and improve the availability of petroleum products across the country.
“Since then, the implementation committee chaired by the Minister of Finance and we, the technical committee, have worked intensely with NNPC and Dangote refinery to fashion out the details of the modalities for the implementation of the FEC approval,” Adedeji had stated.
While stating that crude would be sold to Dangote in naira from October 1, the committee chairman and FIRS boss said, “In return, the Dangote refinery will supply PMS (petrol) and diesel of equivalent value to the domestic market to be paid in naira.
“Diesel will be sold in naira by the Dangote refinery to any interested off-taker. PMS will only be sold to NNPC. NNPC will then sell to various marketers for now. All associated regulatory costs (NPA, NIMASA, etc.) will also be paid in naira. We are also setting up a one-stop shop that will coordinate service provision from all regulatory agencies, security agencies, and other stakeholders to ensure a smooth implementation of this initiative.”
Adedeji explained that the technical committee that worked to flesh out the initiative would transition to an implementation execution and monitoring committee working out of Lagos for the next three to six months.
The committee, which includes Lydia Jafiya; the permanent secretary of the Federal Ministry of Finance; the FIRS boss, as well as representatives from NNPC, Central Bank of Nigeria, AfreximBank, and the Nigerian Upstream Petroleum Regulatory Commission, was set up to craft a robust template that will ensure the successful implementation of the initiative.
Wike: ‘When he’s eating, food will be falling down from his mouth’
Reaction as Cristiano Ronaldo absent from Diogo Jota’s funeral
‘Why I can’t join Tinubu, APC’ – Adeleke denies defection
Coalition: What Aregbesola told ADC supporters to do, details emerge
Tiwa Savage marks 12 years of debut album ‘Once Upon a Time’
Five serving governors expected to join coalition platform, ADC
Rivers women slam FCT over allegations against Amaechi’s wife
Nigerian pastor jailed by US court over $4.2m COVID-19 fraud
Zenith Bank emerges Nigeria’s Number one bank for sixteenth consecutive year
Kwankwaso: ‘He does not have pedigree to match Tinubu’
Sports2 weeks agoOfili: ‘Nigeria doesn’t deserve you’ – Fans react as athlete switches allegiance to Turkey
News2 weeks agoUS Back Out: Angry Trump withdraws support for Israel, issues fresh warning, “Do not drop those bombs”
Sports2 weeks ago‘Don’t sign him, he doesn’t follow instructions’ — Club warned against signing Super Eagles star
Spotlights2 weeks agoNo More War: US plots Donald Trump impeachment over unauthorized Iran bombing
Spotlights2 weeks agoAtiku sidelined again as ADA picks Presidential Flagbearer
Politics1 week agoFresh crisis hits coalition as El-Rufai, Obi may pull out over Atiku’s silence game
Politics2 weeks ago2027: Shettima fights back over plot to drop him as Vice President; crisis hits APC