Nigeria admits gasoline subsidy troubles: Update

Adds details on Nigerian gasoline imports

Nigeria's state-owned oil firm NNPC has admitted that it owes "significant debt" to gasoline suppliers and that the "financial strain has placed considerable pressure on the company and poses a threat to the sustainability of fuel supply".

The short statement, issued on 1 September, comes as long queues at service stations in Nigerian cities enter a fourth week.

NNPC's chief financial officer Umar Ajiya revealed on 20 August that the company required reimbursements from the government to cover the difference between gasoline import costs and discounted domestic sales because it has been importing "at a cost price and government is telling us to sell it at half price". Nigeria's "implicit subsidy costs [of gasoline]" could "increase to 3pc of GDP in 2024, from 1pc of GDP in 2023", the IMF said in May.

The financial constraints on NNPC, Nigeria's primary gasoline importer, may have already tempered gasoline deliveries at the country's ports. Finished gasoline imports averaged 22,000 t/d in August, according to Vortexa data, down from 26,000 t/d in the previous seven months.

Nigeria typically tenders for around 1mn t/month of gasoline imports, a market source told Argus, although this has fallen to around 800,000 t/month of late due to lower cash and finance available to the NNPC. Some vessels carrying gasoline are anchored offshore Nigeria and unable to discharge because of the company's financial situation, the source said. NNPC and other marketers in Nigeria are currently holding low gasoline stocks, according to another source.

President Bola Tinubu announced in his inaugural speech in May last year that his administration was ending the country's longstanding gasoline subsidy. This led to NNPC hiking the price of gasoline by 165pc at its retail stations in Lagos two days later. The company's stations in other parts of the country implemented larger hikes depending on their distance from Lagos, the country's main entry port for imported gasoline. NNPC raised the gasoline price by a further 14pc in Lagos on 18 July last year, saying the hike was necessary because of international gasoline price movements and the prevailing dollar exchange rate.

But after the onset of a cost of living crisis and nationwide social unrest in the wake of the two previous gasoline price hikes, the presidency and NNPC issued separate statements on 15 August 2023 saying gasoline prices would not be raised any further. NNPC would subsequently lean on its role as the country's sole importer of gasoline, a position it has filled almost without a break since 2017, to set gasoline ex-depot prices for the country's product marketers below its import costs while also using the country's largest chain of forecourts to set gasoline prices at the pump lower than all other last-mile distributors.

NNPC said in its 1 September statement that it "remains dedicated to its role as the supplier of last resort, ensuring national energy security" as provided for in Nigeria's petroleum industry law and that it is "actively collaborating with relevant government agencies and other stakeholders" to clear its backlog of debt to gasoline suppliers.

"This development.. really highlights the urgency of the Dangote supply, and the need for that gasoline to come to market as soon as possible. All eyes are on the slated start up this month," said Clementine Wallop, director for sub-Saharan Africa at political risk consultancy Horizon Engage.

The government said last month that "significant production increases" of gasoline from the 650,000 b/d Dangote refinery and the Port Harcourt refinery are "expected from November". The government indicated that the restart of Port Harcourt is imminent while gasoline production by Dangote will start this month, tied to a programme that will see the refinery supplied with crude by NNPC in transactions settled in the local currency.

By Adebiyi Olusolape and George Maher-Bonnett