Wale Edun, Nigeria’s Minister of Finance and Coordinating Minister of the Economy, has announced that the Nigerian National Petroleum Company (NNPC) Limited has started paying off its $6 billion debt to suppliers.
Edun made this statement during a meeting with investors in Washington DC, on the sidelines of the 2024 annual meetings of the International Monetary Fund (IMF) and the World Bank.
The NNPC’s debt to refined petrol suppliers has been a significant concern, and Edun’s clarification on the petrol subsidy removal announced earlier in the year is a welcome development.
The national oil firm’s financial strain has been evident, with the company citing the 2021 Petroleum Industry Act (PIA) as a factor in its debt.
“In terms of NNPC and their situation, the reality is that, although the subsidy on May 29, 2023, was removed and was no longer on the balance sheet of the government, it did rear its head, not in terms of petrol subsidy, but foreign exchange subsidy, which was borne elsewhere, and borne mainly by NNPC,” the minister said.
“I think what I can say about their own situation is with where they are now, they have a route to paying down their payables and I’m sure that in no time at all, they will start. From what I understand, they have even commenced the process of paying down their payables.”
On September 1, the NNPC had admitted to owing the sum of $6 billion to suppliers of petrol, also known as premium motor spirit (PMS).
Speaking on the issue, Olufemi Soneye, the company’s chief corporate communications officer, said the NNPC is facing a serious financial strain due to the petrol supply costs, a development that is affecting the company’s ability to sustain PMS supply.
- ‘FG Determined To Maintain Market Pricing Of Petrol’
On pricing, Edun said the Central Bank of Nigeria (CBN) moved to a willing buyer, willing seller, market-based pricing mechanism for foreign exchange (FX).
The minister explained that the same system also applies to petroleum products.
“The same is now true of petrol. Diesel is willing buyer, willing seller, market-based. Kerosene is a free market pricing. Jet fuel is free market pricing and now petrol is the same,” Edun said.
“So, we have local refiners that are able to buy crude in naira. They have their margins, they refine, and they sell in naira and that is the market that we have now.
“Importantly, we can see that it is the first time, in maybe 40 years, that we have had that. It’s taken tremendous, not just boldness and courage, but determination and not just determination, but no small level of skill and consultation and so forth.
“The idea is that there is determination to maintain market pricing of petrol and what that will mean is that the wasteful and inefficient and costly 5 percent of GDP that was flowing out of Nigeria to the benefit of a few people and surrounding countries will now be available to develop and modernise the Nigerian economy.”
In efforts to fully deregulate the downstream sector, the federal government had commenced the new direct purchase model on petrol lifting on October 11.
This means that oil marketers can now buy petroleum products directly from the Dangote refinery and other local producers without going to the NNPC.
