LAGOS (Xinhua) – The Nigerian National Petroleum Company Limited (NNPCL) is reportedly facing significant expenses in importing Premium Motor Spirit (PMS), also known as petrol, following the cessation of oil swaps by the firm. It has been revealed that the NNPCL, which is the sole importer of petrol in Nigeria, has shifted to buying petrol using cash tenders rather than relying on oil swaps.
In the previous swap arrangement, known as Direct Sale, Direct Purchase (DSDP), the national oil firm would sell crude oil to refiners, who, in turn, would supply the NNPCL with an equivalent value of refined petroleum products.
Data from the Nigerian Midstream and Downstream Petroleum Regulatory Authority in July showed that during the post-deregulation period in June 2023, Nigeria’s total petrol consumption was approximately 1.36 billion liters, with an average daily consumption of 48.43 million liters.
Oil marketers revealed that the average ex-depot price of petrol from the sole importer, NNPCL, was N580 per liter, as other marketers had stopped importing the product due to difficulties accessing foreign exchange.
With a daily consumption of 48.43 million liters at an average ex-depot price of N580 per liter, the NNPCL would incur a daily cost of approximately N28.1 billion for petrol imports. Over the course of a month, the importation cost would amount to about N843 billion.
Sources have disclosed that the latest tender by NNPCL to purchase petrol for delivery in November recently closed, and the company is set to settle the last debts associated with oil swaps by the end of the following month.
This shift in importation methods comes after President Bola Tinubu initiated reforms to eliminate costly subsidies on petrol, which had significantly strained the country’s finances.
Operators Call for Refinery Rejuvenation
The continued importation of petrol into Nigeria has drawn criticism from industry operators in the downstream oil sector. They express frustration over the government’s inability to fix the country’s refineries.
The Secretary of the Independent Petroleum Marketers Association of Nigeria, Abuja-Suleja, Mohammed Shuaibu, emphasized that the key to ending expensive petrol imports lies in getting Nigeria’s refineries operational. He highlighted that the government has spent trillions of naira annually on petrol imports when those funds could be reinvested in the country if the refineries were functioning.
Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, suggested that the government should consider selling some of its shares in the refineries to the private sector. He argued that privatizing refinery management would improve their efficiency and sustainability, ultimately reducing the financial burden on the government.
The situation has resulted in some filling stations in the Federal Capital Territory remaining closed, leading to long queues at the few open stations. Some of the open stations have raised their pump prices significantly, while black market sellers charge even higher rates, causing frustration among consumers.
The situation highlights the urgency of addressing Nigeria’s petroleum challenges, including the need to revamp refineries to reduce the country’s reliance on costly petrol imports.