Nigeria’s debt to gasoline suppliers has surpassed $6 billion – doubling since early April – as state oil firm NNPC struggles to cover the gap between fixed pump prices and international fuel costs, six industry sources said.
President Bola Tinubu announced an end to expensive fuel subsidies last year, allowing pump prices to triple. But NNPC capped pump prices shortly afterward as citizens chafed under rising cost of living.
The cap, coupled with a naira currency crash, allowed the subsidy to creep back. The government expects the subsidy to cost at least $3.7 billion this year.
Analysts, NGOs and even government officials have slammed the subsidy for years as wasteful and corrupt. But Nigerians, who get few government services, have long seen cheap fuel as their right, especially in the current cost-of-living crisis.
Last week, deadly riots forced Kenya’s debt-burdened government to cancel planned tax rises, casting a shadow over efforts elsewhere to inflict any further pain on citizens stung by rising inflation.
Senegal’s energy subsidy bill remains high, at 3.3% of GDP, while Egypt and Angola are also trying to axe subsidies to shore up state finances.
NNPC began struggling early this year when late gasoline payments surpassed $3 billion.
The company has still not paid for some January imports, traders said, and the late payments amount to $4 billion to $5 billion. Under contract terms, NNPC is meant to pay within 90 days of delivery.
NNPC declined to comment when contacted by the publication.
“The only reason traders are putting up with it is the $250,000 a month (per cargo) for late payment compensation,” one industry source said.
At least two suppliers already stopped participating in recent tenders after hitting self-imposed debt exposure limits to Nigeria, the sources said, meaning they will not send more gasoline until they receive payments.
Traders thrive in risky environments, but they place limits on how much credit they allocate per trade in order to avoid too much exposure on one borrower. These limits vary by company based on their size and where they operate.
As a result, Nigeria’s tenders for fuel import in June and July were smaller, traders said. NNPC will import via tender about 850,000 tonnes in July, two of the sources said, down from the typical 1 million tonnes in previous months.
With Reuters report
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