The current petrol queue largely overwhelming Lagos motorists may not be unconnected to around $3 billion which the Nigerian National Petroleum Company Limited, NNPCL, is owing to fuel traders for imported petrol.
Sources claimed that the tumbling naira currency and rising global fuel prices have increased the effective subsidy it is paying.
The payment backlog is said to have affected the government’s efforts to shore up its strained finances by curbing costly energy subsidies, according to Reuters.
“They are paying, but it’s slow,” one of the sources with knowledge of the matter said. Five sources 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/
An NNPCL spokesperson said the company was “not aware of any such debt nor any financial issues of such magnitude”.
“Our focus remains on sustaining sufficiency in the supply of petroleum products in Nigeria,” the spokesperson said.
The NNPCL’s suppliers, including international traders like Vitol, Mercuria and Gunvor as well as Nigeria-based trading houses, are still supplying fuel, the sources said.
They declined to be named because they are not authorised to speak to the media. The trading firms declined to comment.
But the payment delays underscore the creeping return of fuel subsidies scrapped in May 2023 .
Nigeria had subsidised fuel for years to keep pump prices affordable, but President Bola Tinubu removed them as part of wider reforms, allowing prices to triple.
Petrol consumption fell by around 30 per cent as higher prices curbed smuggling to neighbouring countries
In June, the federal government capped pump prices at a nationwide average of N617 naira per litre as Nigerians grappled with punishing inflation.
“It’s hard to overstate the significance of fuel subsidies for the administration,” said Clementine Wallop, director for sub-Saharan Africa at political risk consultancy Horizon Engage.
“It was subsidy removal and exchange rate reform that had investors and lenders initially positive about his administration, and it was their removal Tinubu hoped would give his team the ability to spend in the many other areas that need funding.”
Nigeria is almost wholly reliant on fuel imports due to years of mismanagement and under-investment at state-owned oil refineries.
Oil industry sources said rising global petrol prices and a weaker naira had also impacted NNPCL’s ability to import.
At their peak in February, market prices for petrol in West Africa were 1,229 naira per litre, 150 per cent above the level the government capped prices in June, according to pricing data from Argus Media converted with tracking site Aboxifx naira rates.
They have since fallen to around 912 naira per litre, still 295 naira above the capped price.
That left NNPCL as the sole importer of the roughly 40 million litres per day the country consumes, as private importers cannot recoup their costs.
Since the naira has slid against the dollar and oil prices have risen, NNPCL is losing money on every litre sold, traders said.
The International Monetary Fund recently warned that capping pump prices and electricity tariffs below cost recovery could shave up to 3% off GDP in 2024.
“The government still needs to begin formulating a plan to remove the fuel subsidy when conditions allow,” Tellimer’s Patrick Curran said in a note.
Last week, motorists queued for petrol across Lagos, due to a shortage of fuel from depots.
LEADERSHIP earlier reports that queues at petrol stations which emerged in parts of Lagos early last week has been attributed to gap associated with the Easter break which affected effective supply by tanker drivers
A source in the industry denied reports suggesting that the Nigerian National Petroleum Company Limited, NNPCL is rationing supply
Another petroleum marketers source said supply has commenced after the holidays and that depots operated by major marketers and Depot and Petroleum Products Marketers Association, DAPPMA, would receive full supply between Friday and Saturday
The sustained supply marketers said would ease the current hiccup being experienced.
On its part the NNPC Limited said tight supply witnessed in some filling stations in Lagos was as a result of an issue in one of the Depots in the area
The NNPC Retail Limited, has since resolved the issue and normalcy will be restored within the affected area.
The NNPC Limited calls on motorists in Lagos to avoid panic buying of PMS as all hands are on deck to sustain sufficiency in the supply of petroleum products in the area.
Clement Isong, executive secretary of the Major Energy Marketers Association (MEMAN), said logistical issues over Easter caused the constraints, which would soon abate.
