Long queues have resurfaced at petrol stations across Nigeria, sparking renewed concerns over fuel shortages as the Nigerian National Petroleum Company (NNPC) Limited grapples with a $6 billion backlog in petrol payments.

This payment delay has significantly impacted the importation of petrol, causing a spike in fuel prices and widespread frustration among motorists.

According to industry insiders, NNPC owes approximately $6 billion to international traders, with overdue payments for January imports alone surpassing $4 billion to $5 billion.

This delay has forced suppliers to hit self-imposed debt exposure limits to Nigeria, causing a reduction in the volume of petrol supplied.

“The only reason traders are putting up with it is the $250,000 a month (per cargo) for late payment compensation,” an industry source disclosed to Reuters.

However, patience is running thin, and at least two suppliers have already pulled out of recent tenders, signaling a troubling trend.

As a result of these disruptions, Nigeria’s tenders for petrol in June and July were noticeably smaller.

NNPC plans to import around 850,000 tonnes of petrol in July, down from the usual 1 million tonnes. This reduction has had immediate consequences for Nigerian consumers.

Reports from major cities such as Lagos and Abuja indicate a resurgence of long queues at petrol stations.

In Lagos, fuel prices have skyrocketed, with some stations selling petrol for as high as N780 per litre, a significant jump from NNPC’s retail price of N580.

The scarcity has also given rise to black market activities, with sellers offering fuel at inflated prices ranging from N700 to N900 per litre.

The Group Chief Executive Officer of NNPC, Mele Kyari, acknowledged the supply issues and assured the public that efforts are underway to address the situation.

“We are working diligently to roll out more CNG mother stations across the country and ensure a stable supply of petrol,” Kyari stated.

He added that the construction of six new CNG mother stations and three LNG stations would help bring gas closer to consumers, ultimately reducing transportation costs and making fuel more accessible.

Despite these assurances, the current crisis has raised questions about the sustainability of Nigeria’s fuel subsidy system, which was scrapped in May 2023 but has effectively returned through capped pump prices.

The International Monetary Fund (IMF) has projected that the implicit subsidy will cost Nigeria an estimated N8.43 trillion of its projected N17.7 trillion in oil revenue for the year.

Motorists and business owners alike are feeling the pinch of the fuel scarcity.

Ahmad Zakari, a civil engineer in Abuja, recounted his recent ordeal: “Today, we couldn’t get petrol at any of the usual filling stations around Jabi, Utako, and Kubwa Expressway. The queues were unbearable, and prices were exorbitant.”

The NNPC has promised to resolve the supply issues promptly, but the long-term solution appears to hinge on increasing domestic refining capacity.

The completion of the 650,000 barrel-per-day Dangote refinery in Lagos and the revitalization of the NNPC-controlled refinery in Port Harcourt are seen as critical steps in reducing Nigeria’s dependency on imported petrol.

For now, Nigerians must navigate the challenges posed by the current fuel scarcity, hoping that the NNPC’s efforts will soon bear fruit and bring much-needed relief to the nation’s economy.

Oil prices for both Brent and West Texas Intermediate (WTI) crude reached new highs on Thursday, with Brent holding above $87 a barrel, its highest level since April.

Brent crude oil, against which Nigerian oil is priced, rose by 21 cents, or 0.2% to $87.55 a barrel, while U.S. WTI crude oil increased by 18 cents to $84.06 a barrel.

According to the U.S. Energy Information Administration (EIA), crude oil inventories declined by 12.2 million barrels, more than the 680,000 barrels decline predicted by analysts polled by Reuters.

The significant reduction in U.S. crude stocks has bolstered market confidence in continued robust demand.

“Trade is quiet and people are watching the physical market and geopolitical situation,” said Martin King, an analyst at RBN Energy, noting that traders are also keeping an eye on the ongoing conflict in Gaza and the upcoming elections in France and the United Kingdom.

Initially, oil prices had dipped by as much as 83 cents, but the downturn was short-lived.

The weaker U.S. dollar and the optimistic outlook for U.S. fuel demand, spurred by the EIA data, supported the market, according to PVM analyst Tamas Varga.

However, concerns about global demand persist. German industrial orders fell unexpectedly in May, adding to worries about Europe’s largest economy’s recovery.

In the U.S., first-time applications for unemployment benefits increased last week, with overall jobless numbers also rising.

While these factors raise demand concerns, some analysts believe that weaker economic data could prompt the U.S. Federal Reserve to cut interest rates, which might be beneficial for oil markets.

In related news, Russia’s major oil producers, Rosneft and Lukoil, are set to significantly reduce oil exports from the Black Sea port of Novorossiisk in July, as reported by Reuters.

Meanwhile, Saudi Aramco has lowered the price for its flagship Arab Light crude for August sales to Asia by $1.80 a barrel above the Oman/Dubai average.

This price cut highlights the pressure OPEC producers face from growing non-OPEC supply and global economic headwinds.

Despite these challenges, Swiss bank UBS remains optimistic, forecasting that Brent crude will reach $90 a barrel this quarter, driven by OPEC+ production cuts and anticipated declines in oil inventories.

As the global oil market navigates these complexities, the recent spike in Brent and WTI prices underscores the volatile interplay of supply, demand, and geopolitical factors influencing the industry.

OPEC+ is calling on member nations to rectify their quota violations.

This push comes as crude prices soar to near $87 a barrel in London, presenting a crucial juncture for the coalition.

Iraq and Kazakhstan, significant players within the OPEC+ alliance, have pledged to implement additional production cuts to compensate for their previous overproduction.

However, recent production estimates indicate these commitments have yet to be honored.

Internal documents from OPEC+ committees, obtained by Bloomberg, reveal a history of poor compliance with compensation cuts, further complicating current efforts.

The mechanism for compensating overproduction, introduced in mid-2020, was designed to ensure member nations adhered to their assigned quotas.

Yet, this system has rarely been fully implemented. In 2021, for example, Iraq’s backlog of overdue cuts remained largely unchanged, and Gabon’s excess production debt grew significantly.

Saudi Energy Minister Prince Abdulaziz bin Salman emphasized the importance of these compensation cuts, stating, “We need it, and we need it badly,” following the latest OPEC+ meeting on June 2.

The Saudi minister’s remarks highlight the critical role these measures play in the coalition’s strategy to maintain market stability.

Despite the pledges, both Iraq and Kazakhstan have continued to exceed their production limits. In May, Iraq produced 195,000 barrels per day above its target, while Kazakhstan’s output was 43,000 barrels per day over its quota.

These figures underscore the ongoing challenge of enforcing compliance within the group.

Historically, there have been instances where countries like the United Arab Emirates have swiftly addressed their overproduction following public reprimands from leading members like Saudi Arabia.

However, these examples are exceptions rather than the norm. Analysts like Tamas Varga from PVM Oil Associates Ltd. express skepticism, noting that “hard evidence would be needed for the market to be convinced that amends have actually been made.”

The struggle to enforce compliance has significant implications for the oil market. While excess production may offer temporary relief for consumers, it threatens vital revenue streams for OPEC+ nations.

This delicate balance underscores the importance of strict adherence to agreed-upon production limits.

Russia, another key member of OPEC+, has also pledged compensation but has yet to submit a detailed schedule of its planned cuts.

Although Russia curtailed output in May, it still exceeded its quota by 133,000 barrels per day, according to OPEC data.

OPEC+ continues to grapple with enforcing discipline among its members. The coalition’s latest plans, extending the compensation period to the third quarter of 2025, aim to distribute the required cuts over a longer timeframe, potentially making compliance more manageable.

However, the lack of immediate action remains a concern.

As OPEC+ moves forward, the group’s ability to enforce production quotas will be crucial in maintaining market stability and supporting oil prices.

The ongoing efforts to address these challenges reflect the high stakes involved in managing global oil supply and demand.