The Nigerian National Petroleum Corporation (NNPC), is facing a payment backlog of approximately $3 billion to fuel traders for imported petrol, according to a Reuters report quoting sources familiar with the matter.
The delay in payments comes as a result of the tumbling naira currency and the escalating global fuel prices, which have amplified the effective subsidy being paid by NNPC.
The mounting payment backlog poses a challenge to the government’s efforts to manage its strained finances by curtailing costly energy subsidies in Africa’s largest economy.
According to a source, while NNPC is making payments, the process is sluggish. It now takes the company more than 130 days to settle its dues instead of the stipulated 90 days.
Responding to inquiries, an NNPC spokesperson stated that the company was not aware of any such debt or significant financial issues.
The spokesperson reiterated NNPC’s focus on maintaining sufficiency in the supply of petroleum products across Nigeria.
Despite the payment delays, NNPC’s suppliers, which include international traders like Vitol, Mercuria, and Gunvor, alongside Nigeria-based trading houses, continue to supply fuel. However, they declined to comment on the situation, citing confidentiality agreements.
The resurgence of payment delays underscores the gradual reemergence of fuel subsidies, which were abolished in May 2023.
The removal of subsidies was part of broader reforms initiated by President Bola Tinubu’s government, resulting in a tripling of fuel prices. Consequently, petrol consumption declined by approximately 30%, as higher prices curbed smuggling to neighboring countries.
In response to inflationary pressures, the government capped pump prices at a nationwide average of 617 naira per litre in June, further complicating NNPC’s financial position.
Clementine Wallop, Director for sub-Saharan Africa at political risk consultancy Horizon Engage, emphasized the significance of fuel subsidies for the administration.
Wallop noted that the removal of subsidies initially garnered positive reactions from investors and lenders, but their reinstatement could impact the government’s spending capacity in other critical areas.
Reuters
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