Group Chief Executive Officer of Nigerian National Petroleum Company (NNPC) Limited, Mallam Mele Kyari, says the company has terminated its crude-for-petrol swap deal, otherwise called Direct Sale Direct Purchase (DSDP) contracts, with foreign refiners and consortia of traders.
Kyari spoke at the weekend during an interview with Reuters. He said NNPC would now pay cash for petrol imports. He also revealed that private oil marketing companies in Nigeria could begin importing petrol as early as this month.
However, as the fuel subsidy removal continued to generate angry debate nationwide, Independent Petroleum Marketers Association of Nigeria (lPMAN) called on President Bola Tinubu to walk his talk on the total deregulation of the downstream petroleum sector.
Kyari said, according to Reuters, “In the last four months we practically terminated all DSDP contracts. And we now have an arm’s-length process where we can pay cash for the imports.
“This is the first time NNPC has said it is terminating crude swap contracts. By importing less petrol, as private companies import the bulk, NNPC will be able to pay for its purchases in cash.”
The move was part of Tinubu’s plans to deregulate the petrol market and reduce the burden of subsidy payment on government finances.
NNPC had been importing petrol from consortiums of foreign and local trading firms and repaying them with crude oil through the DSDP contracts since 2016, as it did not have enough money to import on a cash-and-carry basis.
Nigeria is Africa’s biggest crude producer, but it imports most of its refined products after running down its refineries.
A significant drop in oil production last year, coupled with high global fuel prices due to the war in Ukraine, pushed NNPC’s debt to traders higher. It owed the consortiums about $2 billion, Reuters quoted a September 2022 NNPC report to the Federation Account Allocation Committee as revealing.
Reuters quoted an in industry source with direct knowledge of the matter as saying that NNPC was still allocating crude for fuel swaps for July loading, though less than in previous months.
In its report detailing March crude oil loadings, NNPC allocated crude to the swap contracts held by the consortiums, the report said.
Kyari said NNPC’s monopoly on petrol supplies was ending and private firms could start importing as early as this month. He added that Nigeria’s total crude and condensate output was at 1.56 million barrels a day (bpd) as of Friday.
Nigeria has struggled to meet its Organisation of Petroleum Exporting Countries (OPEC) oil quota of 1.742 million bpd due to grand oil theft and illegal refining. That has raised doubts on whether Nigeria could meet supplies for the 650,000 bpd newly-inaugurated Dangote Refinery. NNPC has a contract to supply 300,000 bpd to the refinery.
NNPC had last week adjusted the pump price of petrol by nearly 200 per cent, from N195 per litre to between N488 and N557 nationwide. The development followed the announcement by Tinubu during his inaugural address on Monday that fuel subsidy was “gone”.