Petrol scarcity looms in Nigeria as international traders halt supply due to the country’s mounting debt, which has exceeded $6 billion, doubling since early April, according to a report by Reuters.
This issue arises as the Nigerian National Petroleum Company (NNPC) Limited struggles to bridge the gap between fixed pump prices and international fuel costs.
The report highlights that the NNPC began facing difficulties early this year when late petrol payments exceeded $3 billion. As of now, the company still has not settled payments for some imports made in January, leading to late payments totaling between $4 billion and $5 billion, according to traders.
Under the terms of their contracts, the NNPC is required to make payments within 90 days of delivery. An industry source revealed to Reuters, “The only reason traders are putting up with it is the $250,000 a month (per cargo) for late payment compensation.”
At least two suppliers have already withdrawn from current tenders after reaching their self-imposed debt exposure limits to Nigeria. This means they will not provide additional petrol unless they are paid, as reported by Reuters.
“Traders thrive in risky environments, but they place limits on how much credit they allocate per trade in order to avoid too much exposure on one borrower. These limits vary by company based on their size and where they operate,” the publication noted.
As a result, Nigeria’s tenders to purchase petrol in June and July have been smaller. According to traders, the NNPC will import about 850,000 tonnes in July via tender, a decrease from the typical 1 million tonnes in previous months.
President Bola Tinubu announced the removal of the petrol subsidy when he assumed office in May last year, stating that the “ever-increasing costs” of the subsidy could no longer be justified “in the wake of drying resources.” Prior to its removal, the federal government had planned to spend up to N3.3 trillion on the petrol subsidy between January and June 2023.
The petrol subsidy has been a contentious issue in Nigeria, significantly depleting the country’s revenue. Its removal has further deteriorated the living conditions of Nigerians, as rising petrol prices and a weak currency have fueled unbearable levels of inflation.
Despite speculations that the subsidy has been partially reintroduced, the federal government has repeatedly dismissed these claims.
