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Fuel Scarcity: NNPCL Finally Admits $6bn Debt

ByKazeem Badmus

PublishedSeptember 2, 2024

The Nigerian National Petroleum Company Limited has finally admitted that it was facing challenges due to a $6bn debt.

This, the medium gathered may worsen the current scarcity of premium motor spirit, popularly known as petrol.

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.

Nigeria’s debt to suppliers of petrol surpassed $6bn in June, 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.

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“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.

But the company finally made a U-turn on Sunday and admitted 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.”