Despite Cut in Consumption, FG Spends $2.16bn to Import Petrol in Two Months

Emmanuel Addeh in Abuja

The federal government expended about $2.16 billion in importing Premium Motor Spirit (PMS), otherwise known as petrol, in January and February this year, despite the reduction in consumption of the product on the back of the fuel subsidy removal, documents sighted by THISDAY have shown.

Comprising mainly Direct Sale, Direct Purchase (DSDP) arrangement and spot import volumes, the quantity of fuel brought into the country with that amount was over 2.7 million metric tonnes for the period.

This was separated into 1.22 million tonnes in January and 1.03 million tonnes in February respectively for spot purchases, while the volume exchanged through DSDP was 138, 178 tonnes for January 2024 and 126,794 tonnes in February.

According to the Nigerian National Petroleum Company Limited (NNPC) transaction documents covering the period, in January, the national oil company imported fuel valued at $1.019 billion, while in February, the figure was $891 million through the spot purchase arrangement.

However, through the DSDP agreement, Nigeria imported $150.7 million worth of petrol in the first month of 2024, while in February, it swapped products worth $107.9 million  

Consequent upon the removal of petrol subsidy on May 29, 2023 by President Bola Tinubu, in June last year, the NNPC announced that it had begun the termination of crude oil swap contracts and would therefore start to pay cash for petrol imports.

“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,” NNPC’s Group Chief Executive Officer, Mele Kyari, said at the time.

On October 14, 2023, Kyari reiterated to the international media that the national oil firm had started purchasing petrol via cash tenders, rather than oil swaps.

However, the NNPC’s data detailing its import transactions for the first two months of this year, showed that DSDP arrangement was still in place, to a smaller extent than when it started almost a decade ago.

However, the national oil company maintains that the DSDP arrangement had been halted and was no longer in existence.

In essence, the DSDP is an agreement that allows the sale of crude oil to refiners, who will in turn supply NNPC with an equivalent worth of petroleum products.

According to the document, NNPC’s only client in the oil swap deal during the period under consideration was Gulf Transport and Trading, which shipped in the product using four vessels: Sti Veneto, Advantage Love as well as Petalouda and Torm Gwyneth.

On the other hand, the major clients in the spot volume purchases were Coral Energy, Gulf, MRS Oil and Gas, Concord, Mocoh SA, Vitol, Sahara Energy Resources, Cepsa and Totsa.

Others were: Litasco, Cool Spring, Oando Plc, Penero, BP, Northwest, Asian Oil and Gas, Prudent, Emadeb, Aym Shafa, and Bono Oil.

However, the huge volume of import is still taking place despite information that Nigeria’s average daily petrol consumption may have fallen by as much as 30 per cent since President Bola Tinubu scrapped the costly subsidy on the fuel at the end of May last year.

After the removal of subsidy, average daily petrol consumption fell to 48.43 million litres, down from the previous average of 66.9 million, according to figures from the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).

The subsidy, which started in the early 1970s had kept prices cheap for decades in Africa’s biggest economy but it became increasingly expensive for the country, especially as the population skyrocketed and oil production dwindled.

According to available data, the government spent $10 billion on subsidy in 2022, leading to wider deficits and driving up government debt.

When the subsidy was ended, the black markets in neighbouring Cameroon, Benin and Togo that relied on petrol smuggled from Nigeria collapsed. But it is unclear why Nigeria is still importing such huge volumes.

Although it was believed that the removal of subsidy could save Nigeria huge monies that would have been deployed in building the country’s decrepit infrastructure, there has been no word from the federal government in terms of accounting for the monies that have been saved so far in the last 11 months.

However, many industry operators and international bodies have said that the federal government is still paying subsidy on petrol, reason it cannot account for savings from the stoppage of the underpayments. The government has on several occasions denied this insinuation.

In all, the federal government paid about $750 to $850 per unit cost of the product, with between $33 to $52 discount per MT, the document stated.

Nigeria does not refine petrol in-country at the moment, although the authorities have assured that with the coming of the mega 650, 000 barrels per day Dangote refinery and the 60,000 bpd Port Harcourt refinery, Nigeria could be a net exporter of petroleum products in the near future.