NNPCL’s Financial Struggles May Be Part of a Strategy to Justify Fuel Price Hike, Say Experts

Industry experts have suggested that the Nigerian National Petroleum Corporation Limited (NNPCL)’s admission of financial difficulties may be part of a strategic move that could lead to an increase in petrol prices, potentially reaching N950 to N1,000 per litre.

On Sunday, Olufemi Soneye, Chief Corporate Communications Officer for NNPCL, confirmed that the state-run oil company is facing significant financial challenges, including debts to fuel suppliers. While Soneye did not disclose the exact amount owed, he acknowledged the severe pressure this has placed on the company’s ability to sustain fuel supplies.

Despite these admissions, some industry analysts believe the NNPCL’s statement is a precursor to a planned increase in fuel prices. They argue that government officials have been hinting at this possibility over the past two weeks.

Adding to the speculation, the Minister of State for Petroleum, Heineken Lokpobiri, recently urged NNPCL to cease selling fuel below its landing cost, arguing that this would help curb the smuggling of fuel to neighboring countries. According to the Major Energy Marketers Association of Nigeria (MEMAN), the landing cost of petrol as of July 2024 was N1,117 per litre.

The situation is further complicated by Nigeria’s declining crude oil production, which has impacted the country’s ability to import refined products. An independent oil marketer, who spoke anonymously, noted that a rise in pump prices is almost inevitable in a fully deregulated market. He pointed out that the NNPCL remains the primary importer of petrol, with private importation still limited.

Supporting this view, a former chairman of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Ejigbo Depot in Lagos, Mr. Akin Akinade, highlighted the challenges faced by marketers who are forced to purchase fuel at high prices from third-party suppliers. He explained that with the current costs, it is impossible for marketers to reduce their selling prices without incurring losses.

Tunji Oyebanji, Chief Executive Officer of 11 Plc (formerly Mobil Nigeria), echoed these concerns, stating that selling fuel below cost is unsustainable. He suggested that allowing fuel to be sold at an economic price could encourage more importers, improve supply, and alleviate the financial strain on NNPCL. He criticized the corporation for not being more transparent about the situation earlier, expressing confusion over why these issues were not addressed sooner.