Debts everywhere: NNPC owes oil traders N2.3 trn

Sopuruchi Onwuka

The desperate efforts by the new administration of President Bola Tinubu to gain control of the country’s fiscal channels may suffer glitches as more and more debts float to the surface.

In addition to the current pile of debts accumulated by the government of former President Muhammadu Buhari, transactional debts incurred by the Nigerian National Petroleum Company (NNPC) Limited will definitely delay the highly recovery of the economy or even sink the economy deeper into the debt quandary.

Reports served by market intelligence groups hold that the national oil company is currently in arrears of crude oil delivery to its fuel barter partners to the total value of $3.0 billion or N2.25 trillion. The debt, according to a report by Reuters arose from arrears in the delivery of crude oil to traders benefitting from the country’s wasteful crude for fuel barter arrangement.

The arrangement has for years involved more than a dozen foreign and local trading consortia and backpayments are expected to continue until at least October 2023, according to the four traders involved in business with NNPC.

Under the arrangement, The Oracle Today reports, the NNPC traditionally surrendered crude oil allocation to its moribund refineries to the traders who would sell such crude oil consignments to foreign refineries and use the proceeds to source specified fuel products for imports into Nigeria.

Nigeria is the only major petroleum producer and crude oil exporter running the inefficient supply method in the whole world. Despite terming the barter arrangement direct-sale and direct-direct supply or DSDP, it has remained in the hands of renowned global oil traders who have active offtake contracts with refineries elsewhere in the world.

According to the report, Nigeria has accumulated up to $3.0 billion in debts to trading houses such as Vitol and oil majors such as BP (BP.L), arising from fuel supplies under the DSDP. It added that NNPC has delayed for about six months to deliver crude oil payment for the products it received from the traders.

The Oracle Today reports that NNPC has three refining companies operating four refineries with cumulative capacity to process significant 445,000 barrels of crude and produce over 70 million liters of refined fuel per day.

The three refining companies including the Port Harcourt Refining Company (PHRC), the Warri Refining and Petrochemical Company (WRPC) and the Kaduna Refinery and Petrochemical Company (KRPC) currently exist only in name with no activity for over 30 years, resulting in plant obsolescence and facility dilapidation.

Surprisingly, surprising investigators working for the National Assembly estimate that over $30 billion has been spent from the nation’s oil income in maintaining the moribund refineries eve as the NNPC continued massive importation programme in secret transactions under the DSDP.

All industry groups and players in the organized private sector have severally called for data verification over the NNPC import claims and associated subsidy claims after they vehemently disputed national fuel consumption figures advanced by the company as basis for claiming over N4.3 trillion as subsidy in 2022.

The domestic fuel market groups and international market intelligence analysts had at their last seminar called for joint data dashboard to provide a transparent and credible window on the trends in the local and international oil markets.  

Until the liberalization of the domestic fuel market by the new government, NNPC had remained the sole market supplier and sole beneficiary of the domestic fuel subsidy; a situation which provided opportunity for data appropriation. The state monopoly in the domestic fuel supply also led to disputes over consumption figures. While NNPC claims supply of about 70 million liters of petro per day, the market players calculate about 35 million liters.

Trading sources revealed that NNPC had $200 million for cargoes in May, but the details of the transactions are not available tom provide The Oracle Today with the needed pointer to estimate size of the supply o average daily supply of petrol into the country.

The NNPC points at DSDP as basis for its market supply dominance, arguing that the swap deals are cost efficient, cashless and nearly automatic in translating to timely delivery of fuel.

But the recent report indicates that NNPC trailing four to six months behind schedule in repaying traders with cargoes of crude.

With a tumult of allegations relating to secrecy and corruption from the organized labour, the OPS and civil society groups, the NNPC has declared it would soon end the DSDP following market deregulation and liberalization by the government.

Traders, according to the report, revealed that NNPC is still using the DSDP for July petrol delivery and has to pay for those cargoes in crude as well as the pending payments for previous months of swaps.

“Swaps will ultimately stop but not yet. We are getting our swaps crude cargo in October at the earliest,” one major player said.