Nigeria’s decline in crude production has resulted in delayed payments to some local gasoline suppliers by the Nigerian National Petroleum Corporation (NNPC).
According to Mele Kyari, the Chief Executive Officer of the NNPC, Nigeria’s oil production has dropped to a multi-decade low of less than 1.2 million barrels per day due to a series of oil theft and other insecurities. Therefore, it was impossible to meet certain obligations to local suppliers given NNPC’s operating model, Investors King understands.
The NNPC imports all the country’s gasoline for road transport and other usages, then go ahead to swap most of it for crude with International traders like TotalEnergies SE, Vitol Group, and domestic traders like Sahara Group Ltd. And Oando plc.
Kyari disclosed that a new deal was signed late last year, which involves a longer credit period.
The CEO then went ahead to request the local importers to permit payment delay for at least 90 days promising an additional premium per ton of gasoline for local importers accepting delayed payments.
The new deal which was signed late last year goes hand in hand with the original deal “direct deal, direct purchase”. The new deal expects the NNPC to provide crude before the suppliers deliver the fuel.
The companies involved in those new deals are Sahara, Oando, MRS Oil, and Duke Oil, a subsidiary of NNPC.
However, while the original deal accounts for the biggest source of Nigeria’s gasoline, the new deal accounted for almost a third of the deliveries in the first seven months of the year.
Meanwhile, since December, unplanned purchases by NNPC have accounted for 13% of total volumes.
NNPC imports about 1.3 million tons of gasoline monthly, and it swaps about 320,000 barrels of crude oil daily. However, Nigeria’s fuel imports were 50% higher in March and April.
It’s no secret that the major cause of the decline in Nigeria’s crude production is the massive level of oil theft and pipeline vandalism happening in the Niger Delta region.