According to traders and executives who spoke to Reuters, Nigeria has accumulated debts of up to $3 billion to commodity traders like Vitol and oil majors like BP. These debts are related to fuel supplies, and Nigeria currently lags by four to six months in repaying them with crude oil cargoes.
The crude oil swap deal, known as Direct Sale Direct Purchase (DSDP), is an agreement which involves NNPCL delivering crude oil to trading consortiums who would then return with imported petroleum products. Under the deal, NNPCL reportedly delivered 364.5 million barrels of crude oil over three years and four months. Even though the last phase of the arrangement was meant to end in February 2023, traders reported to Reuters that NNPCL is engaging in PMS imports through swaps for July delivery. And these imports necessitate payment in crude oil, in addition to the outstanding payments for previous months of swaps.
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Reuters reported that according to the four traders engaged in business with NNPC, the DSDP arrangement has included over a dozen foreign and local trading consortia. And it is expected that the back payments will persist until at least October 2023. Additionally, since the NNPC made a cash payment of $200 million to certain partners in May, no additional payments have been made.
in an interview with Reuters, Mele Kyari, the Group Managing Director of NNPCL noted that the company was going to terminate all its crude oil swap deals. He also noted that private companies could start importing PMS before June ends. And last week, the Federal Government through the National Midstream Downstream Petroleum Regulatory Authority (NMDPRA) issued licences to six new companies to start importing petroleum products.
As it Stands Right Now
As it stands right now, the Federation’s revenue situation is exacerbated by the drop in oil production as well as weakening oil prices. In May 2023, data from NUPRC shows that Nigeria’s oil output was about 1.184 million bpd, an increase from the 998,602 bpd recorded in April 2023.
From January to May 2023, Nigeria’s oil output excluding condensates averaged 1.2 million bpd, a far cry from the 1.8 million bpd production figure on which the 2023 budget is benchmarked. With the budget being based on a benchmark price of $75 per barrel for Bonny Light, Nigeria’s crude oil derivative, there are fears that the deficit in the budget may widen as Bonny Light has suffered a steep drop in price, failing to cross the $80 mark since the start of May 2023.
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At the moment, the Nigerian government is faced with a couple of challenging situations, especially around the oil and gas sector. With the removal of fuel subsidies, the Federal Government has been unable to provide any safety net for poor and vulnerable Nigerians who would be affected. And this is not far-fetched from the poor financial situation that was left behind by the previous government. In the face of a $100 billion debt profile, a dangerously high debt-to-revenue ratio, and a decades-high inflation rate, the new administration faces a daunting task.
