Nigeria’s dwindling crude oil output has forced the Nigeria National Petroleum Company [NNPC] to defer payments to some local oil marketers by at least three months.
The NNPC imports all the nation’s fuel for road transport, swapping most for crude with international traders including Vitol Group and TotalEnergies SE and domestic groups such as Sahara Group Ltd. and Oando Plc.
As the nation’s oil production slumped to multi-decade low of less than 1.2 million barrels a day, NNPC has asked local importers to permit payment delays of at least 90 days, according to chief executive officer, Mr. Mele Kyari.
The new deals created late last year involve “a longer credit period,” Kyari said in an interview with Bloomberg in Abuja.
The availability and cost of gasoline are politically sensitive issues in Nigeria, especially in the run up to elections in February. Nigeria spent about N2.7trillion ($6.2 billion) on subsidies from January to July this year to keep the pump price among the lowest in the world, according to NNPC data.
NNPC’s CEO is confident that a rebound in Nigeria’s crude production will allow the country to clear all debit obligations with the marketers.
Kyari expects that the country would record additional 500,000 barrels a day to its output by the end of November, mainly by restarting activities on the Shell Plc-operated Forcados export terminal and Trans-Niger pipeline.
“We will meet all the deliveries and still have surplus crude production for cash. They know we can pay. Otherwise they wouldn’t supply,” the NNPC boss said
The new contracts operate alongside the original “direct sale, direct purchase” deals, under which NNPC is expected to provide crude before traders deliver the fuel. Those local firms accepting deferred payments receive an additional premium per ton of gasoline, according to people familiar with the arrangements. So far, the companies involved in those new contracts are Sahara, Oando, MRS Oil and Duke Oil, a subsidiary of NNPC.
While the original deals still account for the biggest source of Nigeria’s petroleum products, the new contracts represented almost a third of the deliveries in the first seven months of the year.
Since December, ad hoc purchases by the state-owned firm have accounted for 13% of total volumes. NNPC imports about 1.3 million tons of gasoline per month, against which it commits about 320,000 barrels a day of crude to the swaps, according to company data.
However, Nigeria’s fuel imports were more than 50% higher in both March and April. Government has blamed the steady decline in crude production since early 2020 on massive levels of theft on the pipelines that crisscross the Niger Delta.