Rising Forex Rates And $6B Debt Jeopardize Nigeria’s Fuel Supply, IPMAN Predicts Extended Shortages

Rising Forex Rates And $6B Debt Jeopardize Nigeria’s Fuel Supply, IPMAN Predicts Extended Shortages

The outlook for a quick resolution to Nigeria’s petrol shortage has grown increasingly grim, as new developments on Sunday revealed the escalating challenges facing the Federal Government……CONTINUE READING 

A massive $6 billion debt owed to petrol suppliers, along with a severe liquidity crisis, has significantly limited the government’s ability to continue importing the critical fuel.

This situation has been further complicated by the Independent Petroleum Marketers Association of Nigeria (IPMAN), which reported that its members no longer have access to bulk petrol supplies.

Oil marketers have expressed their inability to import petrol, citing the skyrocketing foreign exchange rate, which has driven the landing cost of petrol to over N1,100 per liter. As a result, the fuel scarcity has worsened, and consumers are bearing the burden of higher prices at the pump.

Additionally, the Nigerian National Petroleum Company (NNPC) has been severely affected, with its importation costs becoming unsustainable by August 2023 and ballooning to N5.41 trillion by April 2024. The continued devaluation of the naira has further strained the company’s finances, raising concerns about the sustainability of petrol imports and the likelihood of even more severe shortages in the near future.

According to Vanguard, IPMAN expressed concerns on Sunday about the exclusion of its members from the direct supply of petrol from NNPC Limited. Due to this exclusion, its members have been forced to purchase petrol from private depot owners at inflated prices, which has further disrupted the supply chain.

IPMAN’s Public Relations Officer, Chief Chinedu Ukadike, stated that without direct supply from NNPC, resolving the ongoing fuel shortages, which have persisted for over two months, will be difficult. He pointed out that although petrol products have started arriving at ports in Warri, Port Harcourt, and Lagos, IPMAN members are still struggling to access these supplies.

“For several weeks, IPMAN members have not received any supplies. We’ve been purchasing from other tank farm owners and major marketers. Recently, products have begun arriving at Warri, Lagos, and Port Harcourt, but our members are still not getting allocations,” Ukadike said.

He assured that if the supply issues are resolved, fuel could be made available at more affordable rates. However, he noted that the high costs of obtaining products from private depots, driven by scarcity, are inflating prices.

“When products are scarce, tank farm owners prioritize their own filling stations. As a result, we have to visit these stations, often facing a surge of trucks waiting to be discharged, and pay extra to obtain petrol,” he explained.

“Even at NNPC stations, there are long lines of trucks waiting for discharge. This situation has turned independent marketers into dependent ones, as we are no longer properly included in the distribution chain,” Ukadike added.

He also highlighted that transporting a truck of petrol from coastal depots to Abuja, which used to cost around N500,000, has now escalated to about N3.5 million due to high diesel prices, truck maintenance, and poor road conditions.

Recently, oil marketers have called for a reduction in the pump price of diesel to N700 per liter to improve petrol distribution across the country. The President of the Natural Oil and Gas Suppliers Association of Nigeria (NOGASA), Mr. Benneth Korie Doi, emphasized that the high cost of diesel used by trucks is a significant barrier to efficient petrol distribution.

Doi remarked, “With Dangote’s refinery production and crude oil transactions in naira, we anticipate a reduction in AGO (Automated Gas Oil) prices. NNPC should use its stake in Dangote’s refinery to lower these costs, which will, in turn, reduce transportation expenses and market prices.”

He also stressed the need for a competitive downstream sector in the petroleum industry, warning against monopolies. Doi praised Aliko Dangote for his significant contribution to the industry by establishing the largest refinery in Nigeria.

He added that the development promises major benefits, including increased supply, competition, and a boost to the national economy and currency.

“To ensure balanced distribution, I urge that Dangote’s refined products be made available to a wide range of stakeholders, including NNPC Trading, NNPC Retail, DAPPMAN, MOMAN, IPMAN, PETROAN, and NOGASA. Such inclusivity will ensure sustainable and widespread distribution across the country,” he said.

On Sunday, SaharaReporters also noted that the state-owned Nigerian National Petroleum Company (NNPC) Limited acknowledged recent reports in national newspapers regarding its significant debt to petrol suppliers. The company’s Chief Corporate Communications Officer, Olufemi Soneye, confirmed that this financial strain has placed considerable pressure on NNPC and poses a threat to the sustainability of fuel supply.

“In line with the Petroleum Industry Act (PIA), NNPC Ltd. remains dedicated to its role as the 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,” the statement said.

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