The price of Premium Motor Spirit (PMS), commonly known as petrol, may rise above N1,000 per litre as the Nigerian National Petroleum Company (NNPC) Limited has disclosed a debt of $6 billion owed to suppliers.
Government officials have recently suggested that the current official petrol price of N617 per litre may be difficult to sustain due to the volatile exchange rate of the Naira against the U.S. dollar.
In recent weeks, long queues have reappeared at independent filling stations in Abuja, Lagos, and other states, where petrol is being sold at around N720 per litre, with some outlets charging as much as N1,000 per litre.
The price of petrol skyrocketed last year after President Bola Ahmed Tinubu removed the fuel subsidy. Despite initial denials, the Federal Government admitted on June 5, 2024, that it had been paying a subsidy on petrol.
The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, in a draft report of the Accelerated Stabilisation and Advancement Plan (ASAP) presented to President Tinubu, revealed that the estimated expenditure on fuel subsidy for 2024 is N5.4 trillion, which is about N1.8 trillion more than the amount spent in 2023.
A potential increase in pump prices would mark the fourth hike in 15 months. According to oil marketers, this increase could happen sooner than expected.
The NNPCL has repeatedly assured the public of sufficient reserves and urged against panic buying. However, on Sunday, the company acknowledged significant debt to petrol suppliers, with Reuters reporting that Nigeria’s debt to petroleum products suppliers has exceeded $6 billion, doubling since early April this year, as the NNPCL struggles to bridge the gap between fixed pump prices and international fuel costs.
NNPCL’s Chief Corporate Communications Officer, Olufemi Soneye, stated that the financial strain has put 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,” the statement read.
The NNPCL has informed the Federation Account Allocation Committee (FAAC) of an outstanding N4.56 trillion debt incurred from selling petrol at a subsidized price between August 2023 and June 2024.
Documents from FAAC meetings in July and August revealed that the outstanding amount is due to unrecovered funds arising from exchange rate differentials on petrol importation.
Experts suggest that the government’s recent announcements may be part of a strategy that could result in petrol prices rising to between N950 and N1,000 per litre. They allege that officials have been promoting this narrative for the past two weeks.
On Monday, the Minister of State for Petroleum, Heineken Lokpobiri, urged the NNPCL to halt the sale of fuel below landing costs, arguing that this would help curb smuggling to neighboring countries.
The Major Energy Marketers Association of Nigeria (MEMAN) recently disclosed that the landing cost of petrol as of July 2024 was N1,117 per litre. The landing costs of AGO (Diesel) and ATK were N1,157 and N1,217 per litre, respectively, for vessels landing in Apapa, Lagos.
An independent oil marketer, speaking anonymously, noted that a rise in pump prices was almost inevitable in a fully deregulated market. The NNPCL remains the main importer, with private importation still limited. Nigeria’s declining crude oil output, which affects the country’s ability to import refined products, further exacerbates the situation, as observed by the Organisation of Petroleum Exporting Countries (OPEC).
A former chairman of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Ejigbo Depot in Lagos, Mr. Akin Akinade, explained that their members have no direct supply from NNPC and must buy from third-party suppliers at higher costs, which drives up the retail price.
Tunji Oyebanji, Chief Executive Officer of 11 Plc (formerly Mobil Nigeria), speaking to Daily Trust emphasized that selling below cost, whether from imports or local refineries, is unsustainable. He suggested that if petrol were sold at an economic price, more suppliers could enter the market, improving supply and alleviating the financial burden on NNPCL.
“It’s either that, or these supply disruptions will continue indefinitely. I am baffled why they have not been upfront about this from the start instead of offering denials,” he said.
