Nigerian Petrol Imports Shrink, Fuel Queues Surge Over $6bn Debt

Building petrol queues in major Nigerian cities has been attributed to the limited importation of Premium Motor Spirit (PMS) also called petrol in Nigeria.

Although some marketers could not confirm to our Correspondent any supply gap at the moment the report says Nigeria is facing challenges over debt to suppliers which is reported to have surpassed $6 billion doubling since April.

The Nigerian National Petroleum Company Limited (NNPCL) is currently struggling to cover the gap between fixed pump prices and international fuel costs, six industry sources said.

Besides President Bola Tinubu ending fuel subsidies last year, allowing pump prices to triple the NNPCL also capped pump prices shortly afterwards as citizens coughed under the rising cost of living.

The cap, coupled with a Naira currency crash allowed the subsidy to creep back as government expects the subsidy to cost at least $3.7 billion this year.

Analysts, NGOs and even government officials have slammed the subsidy for years as wasteful and corrupt, but Nigerians, who get few government services, have long seen cheap fuel as their right, especially in the current cost-of-living crisis. The NNPC began struggling early this year when late petrol payments surpassed $3 billion.

The company has still not paid for some January imports, traders said, and the late payments amount to $4 billion to $5 billion under contract terms, NNPC is meant to pay within 90 days of delivery.

The NNPC declined to comment, said Reuters.

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.

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.

Traders thrive in risky environments, but they place limits on how much credit they allocate per trade to avoid too much exposure on one borrower. These limits vary by company based on their size and where they operate. As a result, Nigeria’s tenders to buy petrol in June and July were smaller, traders said.

The NNPCL will import via tender about 850,000 tonnes in July, two of the sources said, down from the typical 1 million tonnes in previous months. Fresh fuel queues have already started to form in Lagos and Abuja this week, and some Abuja stations stopped selling gasoline.

The newly opened 650,000 barrel-per-day Dangote refinery has not yet produced marketable petrol and is selling other fuels abroad. The country has few savings to fall back upon as corruption and wasteful spending have eaten up decades of oil revenues.

The NNPCL has also mortgaged much of its spot oil cargoes, limiting what it can sell for cash. In late 2023, NNPCL secured its biggest-ever oil-backed loan worth $3.3 billion from AfreximBank and a consortium of traders to shore up the country’s foreign exchange.