Four traders and executives told Reuters that Nigeria owes Vitol and BP (BP.L) $3 billion for petroleum supply and is four to six months behind in repaying them with crude shipments.
Nigeria’s debt would likely take months to clear, complicating new President Bola Tinubu’s measures to wean Africa’s largest economy and most populous nation off costly fuel subsidies contributing to debt and foreign exchange shortages.
Tinubu liberalized the naira and eliminated petrol price controls in his first two weeks, which investors had been waiting for for over a decade.
Nigeria, Africa’s leading oil producer, will end its crude-for-gasoline swap as part of those reforms. Nigeria supplied gasoline at a discount, and the government paid the difference for years.
Last year’s subsidy was $10 billion. Protests followed the last government attempt to abolish the plan. Nigeria imports because its refineries cannot fulfill domestic demand.
After years of criticism from civil society groups like the Nigerian Extractive Transparency Initiative, NNPC’s Mele Kyari announced earlier this month that it was stopping the swaps, known as Direct Purchase Direct Sale (DSDP).
Kyari stated payments would be made in cash, but traders believe NNPC is still purchasing gasoline via swaps for July delivery and must pay for those cargoes and prior swap payments in crude.
Four NNPC dealers expect back payments to continue until at least October 2023. The scheme has involved more than a dozen foreign and local trading consortia for years.
NPPC, which claims $6 billion in gasoline subsidies from the government, declined to comment. No government comment. Vitol, Mercuria, BP, and TotalEnergies (TTEF.PA) rejected the comment.
Swaps will eventually halt. “We get our swaps crude cargo in October at the earliest,” one big player stated.
Two trading sources said NNPC made a rare $200 million cash payment to some partners in May, but no more payments have been made due to the government’s financial shortage.
Nigeria’s budgetary problems are worsened by decreased oil production, which affects debt repayment revenue.
Lack of investment has reduced Nigeria’s crude output to 1.1 million barrels daily from 1.8 million.
Private importers
Paying for fuel deliveries with crude cargoes reduces Nigeria and NNPC’s oil exports and earnings.
NNPC kept earnings to offset gasoline sale losses, reducing the state coffer contribution from $30 billion in 2011 to $0 in 2022.
International monetary experts have advised Nigeria to eliminate gasoline subsidies and liberalize its foreign exchange to solve its budgetary issue.
In recent years, Nigeria’s central bank held the naira locked at an artificially high rate that progressively grew from 200 to 450 naira per dollar, which only a few players, including the NNPC, could access. That barred private gasoline importers.
President Tinubu allowed the naira to plummet recently and withdrew special prices, allowing all potential importers to compete in petroleum imports.
However, naira volatility, which makes it hard to calculate profits, and uncertainty about whether enterprises could move money out of the nation due to dollar shortages have inhibited private firms from importing petroleum.
Aliko Dangote’s refinery and private importers will meet future fuel demand. Nigeria’s first large oil plant won’t start operations until next year.
