The Nigerian National Petroleum Company Limited may be spending about N843bn monthly on the importation of Premium Motor Spirit, popularly called petrol, following the halt in oil swaps by the firm, findings showed on Sunday.
NNPCL, the sole importer of petrol into Nigeria, has started buying petrol using cash tenders, rather than oil swaps, Reuters reported on Saturday.
In the swap arrangement, known as Direct Sale, Direct Purchase, which had been in place for nearly a decade, the national oil firm sells crude to refiners, who will in turn supply NNPCL with an equivalent worth of refined petroleum products.
In July, data from the Nigerian Midstream and Downstream Petroleum Regulatory Authority showed that between June 1 and June 28, 2023, which was described as the post-deregulation period, the total petrol consumption across the country was 1.36 billion litres, while the average daily consumption was put at 48.43 million litres.
Oil marketers said the average ex-depot price of petrol from the only importer of the commodity was N580/litre. NNPCL is the sole PMS importer currently. Other marketers stopped importing the product due to their inability to access foreign exchange, among others.
With the average daily consumption of petrol at 48.43 million litres and an average ex-depot price of N580/litre, the national oil company would spend N28.1bn daily on PMS imports.
In 30 days, the cost of importing the commodity is going to be about N843bn, going by the fact that NNPCL now pays cash for PMS imports.
Sources told Reuters that the national company’s latest tender to buy petrol for delivery in November closed last week.
Two of the sources, according to the report, said NNPCL would pay the last debts owed under the oil swaps by the end of next month.
The shift occurred four months after President Bola Tinubu commenced reforms to eliminate the costly subsidies on petrol, which depleted the country’s finances massively.
On June 4, 2023, NNPCL said it had commenced the termination of crude oil swap contracts, hinting at payment of cash for petrol imports.
“In the last four months, we practically terminated all Direct Sale Direct Purchase contracts. And we now have an arm’s-length process where we can pay cash for the imports,” the Group Chief Executive Officer, NNPCL, Mele Kyari, had said.
Nigeria reportedly owes about $3bn to trading houses and oil majors for crude oil swap arrangements.
The continued importation of petrol into Nigeria was condemned by operators in the downstream oil sector on Sunday, as they wondered why the Federal Government had still been unable to fix Nigeria’s refineries.
Operators knock FG
“The only way to stop spending our hard-earned dollars on the importation of petroleum products is when we start refining our crude oil here in Nigeria,” the Secretary of the Independent Petroleum Marketers Association of Nigeria, Abuja-Suleja, Mohammed Shuaibu, stated.
He added, “We still cannot understand why it is taking so long for our government to get the refineries in Warri, Port Harcourt and Kaduna working.
“We spend trillions of naira yearly on petrol imports when we can plow back this money in our sector if our refineries were working. This is a sad situation.”
He also stated that the government had continued to borrow money to support the economy, stressing that this would have been reduced had it been Nigeria’s refineries were working.
“Recently, the NNPCL said it secured a $3bn loan to help the local currency and boost activities in the oil sector. There wouldn’t be a need for such a level of borrowing if our refineries were working.
“The government should work hard to get our refineries working. It will save Nigeria a lot of funds. It will reduce the pressure on our forex. It will create jobs and guarantee the supply of refined products. Marketers will stop chasing dollars for imports.
“The gains are enormous. So if they want to reduce the level at which they borrow billions of dollars, one sure way to help is by ensuring that our refineries are brought back on stream fast,” Shuaibu stated.
Also, speaking on refineries, the Chief Executive Officer, Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, explained that the government should make the refineries work by selling part of its shares in the facilities.
He said, “Let’s get it clear that it is not in the interest of this country for the government to be managing those refineries. Look at how much we have spent on these refineries for their Turn Around Maintenance.
“So from that point of view, I think that since the government has started the rehabilitation of the refineries, once it finishes rehabilitating them, it should work out a model where it can sell some of the shares in them. It may not be everything.
“It should be sold to the private sector to manage the refineries. We can develop the NLNG (Nigeria Liquefied Natural Gas Company) model, where the government has a minority share, say 49 percent, for instance.
“But the majority share will be owned by those with the technical capacity and financial muscle to manage them so that we can have refineries that work. The government cannot manage them. We may not go for outright sale, but implement something to make the refineries work,” Yusuf stated.
Madukwe B. Nwabuisi is an accomplished journalist renown for his fearless reporting style and extensive expertise in the field. He is an investigative journalist, who has established himself as a kamikaze reporter.