NNPC admits to owing $6bn to petrol suppliers amid lingering fuel scarcity

The Nigerian National Petroleum Company (NNPC) Limited has officially acknowledged that it owes a significant debt to suppliers of premium motor spirit (PMS), commonly known as petrol.

This admission was made in a statement released on Sunday by Olufemi Soneye, the company’s Chief Corporate Communications Officer.

The debt, amounting to $6 billion, has exacerbated the ongoing petrol scarcity across various parts of Nigeria, a situation that has persisted since May. Earlier reports had indicated that this financial burden was a key factor in the fuel shortages.

The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) has attributed the scarcity to issues related to contracts between mother and daughter vessels.

In July, NNPC had cited factors such as flooding, adverse weather conditions, and disruptions in the discharge operations of some vessels as reasons for the ongoing petrol shortages.

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However, in its recent statement, the company admitted that its financial struggles, largely due to the high costs of maintaining petrol supply, are also contributing to the scarcity.

“NNPC Ltd. acknowledges the reports concerning our significant debt to petrol suppliers,” the statement read. “This financial strain is putting considerable pressure on the company and threatens the sustainability of our fuel supply operations.”

Despite these challenges, NNPC reaffirmed its commitment to ensuring national energy security in accordance with the Petroleum Industry Act (PIA). The company stated that it is working closely with government agencies and other stakeholders to maintain a steady supply of petroleum products across the country.

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On August 26, Heineken Lokpobiri, the Minister of State for Petroleum Resources (Oil), revealed that NNPC has been selling petrol below its landing cost, which is fueling smuggling to neighboring countries.

Similarly, on August 20, NNPC’s Chief Financial Officer, Umar Ajiya, disclosed that the company was selling petrol at only half of its landing cost, highlighting the financial challenges it faces.

The official pump price of petrol in Nigeria is currently around ₦600 per liter, but the landing cost is approximately ₦1,200 per liter. According to Ajiya, NNPC spent ₦7.8 trillion to subsidize PMS between January and July of this year.

NNPC had previously denied subsidizing petrol after reports emerged on August 19 that President Bola Tinubu had approved the use of the company’s 2023 final dividends to cover the petrol subsidy.

According to a report by Agora Policy, an Abuja-based think tank, petrol subsidies rose to ₦1.16 trillion in 2021, ₦2.91 trillion in 2022, and ₦5.10 trillion in 2023. The subsidy for the first seven months of 2024 alone stood at ₦4.2 trillion.

The growing debt and subsidy burden have placed NNPC under intense financial pressure, raising concerns about the long-term sustainability of fuel supply in Nigeria.