Regrettably, the current fuel scarcity will likely persist for a long time because of the cash-flow problem of Nigeria National Petroleum Company Limited. Adedapo Segun, Executive Vice President, Downstream of NNPCL, affirms it.
NNPCL has finally confessed to its inability to pay its foreign suppliers and then order for new supplies. The Nigerian economy may be grinding to a halt as the stock of petrol to run vehicles, diesel to run industries and kerosene to cook food at home, eventually run out.
Earlier in the year, NNPCL did a poor job of denying that it owed “the sum of $6.8 billion to any international traders.” It argued that “trading business transactions are carried out on credit,” and that NNPCL, “through its subsidiary, NNPC Trading, maintains many open trade credit lines with several traders.”
Olufemi Soneye, Chief Corporate Communication Officer of NNPCL, finally “acknowledged recent reports in national newspapers regarding the company’s significant debt to petrol suppliers, admitting that this financial strain has placed considerable pressure on the company and poses a threat to the sustainability of fuel supply.”
By July 2024, five traders had discontinued supply of petrol to Nigeria. But, NNPCL maintained the façade of availability of petrol in the market by buying in small quantities. It presented an implausible position that NNPCL was “actively collaborating with relevant government agencies and other stakeholders to maintain a consistent supply of petroleum products nationwide.”
Watchers of the downstream sub-sector of the petroleum industry are already suggesting that the only way for NNPCL to reverse continued shortage of petrol is to end the subsidy that it surreptitiously pays on the product, and allow the pump price to move up beyond N1,000 per litre. NNPCL (now) admits that the Federal Government subsidises current landing cost of N1,117 per litre.
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As long as the foreign exchange market is allowed to find its level, every commodity that this import-dependent country imports will be impacted by the consequent devaluation of the Naira and the “imported inflation” monster.
For now, what appears to be the saving grace for regular supply of petrol is the Dangote Refinery that just commenced production. When the smaller modular refineries begin production, the plight of Nigerians may be abated. However, the price may still be high, because Dangote Refinery, like other private business – not being a charitable organisation – will not accept “under recovery” of his costs. Only the government has responsibilities for subsidy or reverse taxation.
We recall that Aliko Dangote deftly avoided a direct announcement on pricing, but offered, “On PMS, it is an arrangement designed and approved by the Federal Executive Council, which is led by His Excellency, President Bola Ahmed Tinubu.” He, however, had no problem in disclosing that his product could be in petrol stations “in the next 48 hours depending on NNPC(L).” A presidential aide has announced that “Dangote Refinery will certainly not sell below market value.”
Government started the usual coy leaking of intention to raise petrol pump price, and gauged the reactions of the likes of Nigeria Labour Congress that demanded a reversal, and the Nigeria Employers Consultative Association, who thinks the “new pump price could be… making Nigerians to pay for the crass inefficiency of NNPCL).”
As expected, Heineken Lokpobiri, Minister of State for Petroleum Resources (Oil), swiftly denied a price hike, after which another official explained that NNPCL would go bankrupt if it continued to absorb differentials between landing costs and pump price. Later, NNPCL petrol stations quietly adjusted their pump price to N855 per litre.
No one is clear about the seesaw of claims that NLC chose N70,000 minimum wage because President Tinubu threatened to hike petrol price if the union insisted on the higher N250,000 and the denial by a presidential aide that there was no such deal.
We hope Dangote’s expectation that the Naira-for-petroleum deal for domestic refineries may reduce demand for foreign exchange by about 40 per cent and significantly reduce petrol pump price – to the extent that landing costs, imported inflation and high exchange rate of the Naira will be eliminated or reduced – will become a reality. Perhaps this may be the silver lining. The Federal Government must live up to its words.
