Nigeria: With Rising Subsidy Costs, NNPC Finally Admits Owing Foreign Petrol Suppliers Huge Debts

With petrol subsidy costs skyrocketing, after months of denial, the Nigerian National Petroleum Company Limited (NNPC), yesterday finally admitted that it was owing huge debts to its international petrol suppliers.

The national oil company stated that due to the situation, it was facing financial strain, thereby impacting supply sustainability and posing substantial threats to national fuel supply.

The situation has been further worsened by the falling value of the naira against the US dollar as well as the rising international price of crude oil and other costs, which have made it almost impossible to meet the soaring debt obligations.

Since the news was first reported by international news media in the first quarter of this year, the NNPC has consistently said the long fuel queues in the country was not caused by the debts.

In different instances since the news became public, the NNPC has blamed weather conditions, including thunder and lightning, flooding and bad roads for the long fuel lines across the country.

As recent as two weeks ago, the oil company also debunked the recurring reports in the media that it owes international oil traders up to $6.8 billion.

But it appeared to have soft-pedalled during the month when it explained that since the oil trading business is carried out on credit, it is normal for the NNPC to owe at one time or the other.

However, it stated that its subsidiaries were paying up their obligation on a first-in-first-out (FIFO) basis.

“That NNPC Ltd. does not owe the sum of $6.8 billion to any international trader(s). In the oil trading business, transactions are carried out on credit, so it is normal to owe at one point or the other.

“But NNPC Ltd., through its subsidiary, NNPC Trading, has many open trade credit lines from several traders. The company is paying its obligations of related invoices on a first-in-first-out (FIFO) basis,” it added.

Fuel queues which have become a common occurrence in Abuja and neighbouring states spread to Lagos and several other sub-nationals nationwide over three weeks ago. The situation is yet to abate.

Prices have also skyrocketed from the regulated prices by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), selling for as high as N1,200 in parts of the nation.

But admitting to the debts yesterday, in a statement by its Chief Corporate Communications Officer, Olufemi Soneye, the NNPC stated that the debts were causing considerable financial pressure on it.

“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.

“In line with the Petroleum Industry Act (PIA), 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,” Soneye said in a brief statement.

Meanwhile, former Vice President of Nigeria, Atiku Abubakar, yesterday demanded the immediate listing of the Nigerian National Petroleum Company Limited (NNPC) on the stock exchange in line with the Petroleum Industry Act (PIA).

Atiku said this in reaction to the decision of the NNPC to hand over the Warri and Kaduna refineries to private operators who are expected to manage and operate them.

In a statement by his Media Adviser, Paul Ibe, Atiku said: “The NNPC is supposed to have been listed on the stock exchange in line with the PIA. This would make the company more profitable and enhance transparency and corporate governance.

“Currently, the NNPC claims to be private, but this is only a ruse to fool the feeble-minded because it remains the Automated Teller Machine (ATM) of the federal government. Anything short of listing the NNPC on the stock exchange is nothing but a cosmetic development.”

Atiku further stated that the NNPC continues to provide a cover of political protection to the Tinubu government’s policy inconsistency on the payment of subsidy, raising questions about the independence that the PIA requires of the NNPC as a private business concern.

The Peoples Democratic Party (PDP) presidential candidate in the 2023, said previous arrangements and concessions had not worked because of a lack of transparency in the contract award process as well as the failure of the government to attract investors.

The former vice president said that for such a deal to succeed at all, the Bureau of Public Enterprise (BPE) and a credible technical partner like Standard and Poor’s (S&P) must be part of the process.

Atiku added: “Former President Olusegun Obasanjo revealed recently that even Shell, one of the world’s wealthiest oil companies, rejected the offer to operate Nigeria’s refineries. This is because the NNPC has, for years, been a cesspool of endemic corruption.

“This is why over $20 billion that has been spent on the refineries in the last 20 years has led to nowhere. It is also curious that a government that is still paying petrol subsidy is trying to make its refineries profitable. Which businessman will invest in a refinery that has been programmed to operate at a loss?”

Atiku questioned the feasibility of the NNPC’s latest plan even as he pointed out that such arrangements in the past had not been profitable.

He added: “The manage and operate approach has not always worked. The Manitoba Hydro International, which was handed the Transmission Company (TCN) of Nigeria led to nowhere. Similarly, Global Steel Limited, which was handed the Ajaokuta Steel Company, was not able to make the facility profitable.

“The contract was questionably revoked by the Umaru Musa Yar’Adua administration, and Nigeria ended up paying Global Steel a compensation of nearly $500 million while Ajaokuta remains comatose 17 years later.”

The Waziri Adamawa advised the NNPC not to make the contract process opaque like it did with OVH last year, which was not only dubious but has still failed to boost the NNPC’s petrol sufficiency as evidenced by the months long fuel scarcity.

“In 2022, Nueoil, an unknown and newly registered company, acquired OVH and Oando filling stations. Barely four months later, NNPC Retail bought Nueoil and took control of all its assets, including the Oando filling stations.

“Barely eight months later, OVH turned around to take over NNPC Retail. This convoluted transaction was done in order to hide the corruption involved. If this is the approach that the NNPC wants to use in handing over its refineries to private hands, then Nigerians should not expect any positive development whatsoever,” Atiku stressed.

Also, a senior Femi Falana, yesterday expressed concerns over the ‘monumental fraud’ bedevilling fuel importation in Nigeria.

Falana, who made the observation when he was featured as a guest on Sunday’s Channels Television’s ‘Politics Today’, stated that it was irreconcilable that cars were getting lesser on Nigerian roads while the subsidy payment was increasing.

He said: “How many people have bought a car in the last one and a half years, even second-hand cars (in Nigeria)? The point I am making is that the number of vehicles on the road has been reduced. Yet, we were told that during the days of boom, the NNPC was subsidising 68 million litres of fuel per day.

“Now that there are problems, scarcity, and poverty everywhere, no new vehicles on the road, we are still paying for 68 million litres of fuel. Whereas before this regime came on board, the Comptroller General of Customs challenged the NNPC during a Senate public hearing to pay for the amount of fuel that is said to be smuggled out of the country.”

He further alleged that the NNPC was not telling Nigerians everything it claimed to know about the smuggling of crude in the country, maintaining that smugglers need 2,000 petrol tankers to steal the volume of fuel the company claims is being smuggled.