Nigeria faces an impending petrol scarcity as international traders halt supplies over an outstanding debt exceeding $6 billion.
According to a Reuters report on Thursday, the Nigerian National Petroleum Company (NNPC) Limited has struggled to bridge the gap between fixed pump prices and international fuel costs, leading to this financial impasse.
The debt, which was around $3 billion earlier this year, has now doubled.
Reports indicate that NNPC has not yet paid for some petrol imports from January, with late payments now ranging between $4 billion to $5 billion.
Under contract terms, NNPC is supposed to settle payments within 90 days of delivery. However, the company has been compensating traders with $250,000 per month per cargo for late payments, which has been the only reason traders have tolerated the delays, according to industry sources.
At least two suppliers have already withdrawn from current tenders due to reaching their self-imposed debt exposure limits with Nigeria. This withdrawal means they will not supply more petrol until payments are made.
Nigeria’s tenders for petrol in June and July have consequently been smaller.
NNPC is set to import around 850,000 tonnes in July via tender, a reduction from the usual 1 million tonnes in previous months.
This development comes after President Bola Tinubu announced the removal of the petrol subsidy in May last year, citing unsustainable costs amid declining resources. Before the subsidy removal, the federal government had planned to spend up to N3.3 trillion on petrol subsidies between January and June 2023.
While there have been speculations of a partial reintroduction of the subsidy, the federal government has repeatedly denied such claims.
The removal of the subsidy, alongside a weak currency, has exacerbated inflation and worsened living conditions for many Nigerians.