According to four traders and executives, Nigeria has accrued up to $3 billion in arrears to trading companies such as Vitol and oil giants such as BP (BP.L) for gasoline deliveries and is four to six months behind schedule in repaying them with crude shipments.
These four traders and executives made this information known to the American news agency, Reuters.
Nigeria’s debt would most certainly take months to settle, complicating President Bola Tinubu’s reforms aimed at weaning Africa’s largest economy and most populous nation off costly fuel subsidies that have led to rising debt and foreign exchange shortages.
Tinubu lifted petrol price controls and naira currency limitations in his first two weeks in office, liberalization moves that investors had been waiting for more than a decade.
Nigeria, Africa’s largest oil producer, intends to eliminate an existing arrangement in which it exchanges petroleum for gasoline imports as part of those reforms. For years, Nigeria sold gasoline purchased on the open market at a discount to its citizens, with the government picking up the difference.
Last year, the subsidy cost around $10 billion. The last time the government attempted to stop the plan, it was met with demonstrations. Nigeria requires imports due to a lack of refinery capacity to fulfill domestic demand.
To confront its budgetary difficulties, international monetary experts have long recommended that Nigeria eliminate gasoline subsidies and liberalize its foreign exchange.
In recent years, Nigeria’s central bank has maintained the naira fixed at an artificially high rate that has progressively increased from 200 to 450 naira to the dollar, which only a few entities, including the NNPC, have access to. This effectively eliminated prospective private gasoline importers from the market.
President Tinubu has allowed the naira to fall sharply in recent weeks and has withdrawn preferential naira rates, which means that all potential importers would have the same foreign expenses and will be able to compete in petroleum imports.
However, the naira’s volatility, which makes calculating prospective earnings difficult, and uncertainty over whether enterprises would be able to move money out of the nation owing to persistent dollar shortages have prevented private firms from importing petroleum for the time being.
In addition to private importers, Nigeria would rely on Aliko Dangote’s refinery to meet future petroleum demand. The first big oil facility in Nigeria is unlikely to begin full-scale operations until next year.