There are growing concerns about a potential increase in petrol prices in Nigeria as the Nigerian National Petroleum Company Limited (NNPCL) has acknowledged severe financial difficulties.
For the past two weeks, government officials have suggested that maintaining the current price of N617 per litre might not be feasible due to the fluctuating exchange rate of the Naira against the US dollar.
Recently, long queues have been observed at filling stations in Abuja, Lagos, and other states, especially those operated by independent marketers. In many places, petrol is being sold for around N720 per litre, with some outlets charging up to N1,000 per litre.
The NNPCL’s financial troubles follow the removal of petrol subsidies last year, leading to a sharp increase in fuel prices. Despite several denials, the Federal Government admitted on June 5, 2024, that it was still paying subsidies on petrol.
According to the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, the estimated expenditure on fuel subsidies for 2024 is N5.4 trillion, which is N1.8 trillion more than the amount spent in 2023.
This upcoming increase would mark the fourth pump price hike in 15 months, with oil marketers suggesting that the price rise may happen sooner than expected. The NNPCL, which had previously assured the public of sufficient reserves and urged against panic buying, recently acknowledged significant debt to petrol suppliers.
Reports indicate that Nigeria’s debt to petroleum product suppliers has exceeded $6 billion, doubling since April this year. This financial strain is creating considerable pressure on the NNPCL, threatening the sustainability of the country’s fuel supply.
Despite these challenges, the NNPCL remains committed to its role as a supplier of last resort, ensuring national energy security. “We are actively collaborating with relevant government agencies and other stakeholders to maintain a consistent supply of petroleum products nationwide,” said NNPCL’s Chief Corporate Communications Officer, Olufemi Soneye.
The NNPCL recently informed the Federation Account Allocation Committee (FAAC) of an outstanding N4.56 trillion debt for subsidized petrol sales between August 2023 and June 2024. Documents from FAAC meetings in July and August suggest that these unpaid funds are due to exchange rate differences on petrol imports.
Analysts believe that the government’s recent announcements may be part of a broader strategy, predicting petrol prices could reach N950 to N1,000 per litre. The Major Energy Marketers Association of Nigeria (MEMAN) reported that as of July 2024, the landing cost of petrol was N1,117 per litre.
Independent oil marketers argue that price increases are inevitable in a fully deregulated market, with the NNPCL being the primary importer and limited private importation options. The declining crude oil output in Nigeria is also worsening the situation, affecting the country’s ability to import refined products.
