Nigeria owes up to $3 billion to supermajors and trading giants for the fuel-for-crude swaps via which Africa’s biggest oil producer has been importing fuel to meet domestic demand, Reuters reported on Friday, citing executives and traders.
Despite being the largest crude oil producer in Africa, Nigeria lacks enough refining capacity to meet all its domestic fuel demand. So the country has relied for years on the so-called Direct Purchase Direct Sale (DSDP) under which it imports fuels in exchange for crude cargoes to major trading houses and international oil majors, including BP, TotalEnergies, Vitol, and Mercuria.
Nigeria has accumulated a debt to those of around $3 billion and it is also at least four months behind schedule for the repayment in crude, according to Reuters’ sources.
Earlier this month, Mele Kyari, Group Chief Executive Officer at Nigeria’s state-owned oil firm NNPC Ltd, told Reuters that the company would wind down the crude swap contracts and pay in cash for fuel imports.
The move came amid a major reform in the Nigerian fuel retail market after Nigeria’s new President Bola Tinubu removed the fuel subsidies the government was paying for years. The subsidy was a huge cost to the federal government, which last year paid as much as $10 billion for the difference between fuel imported at market prices and sold at discounts to Nigerians.
As private firms now import fuels, the state firm will be able to pay for its fuel imports in cash, Kyari told Reuters in early June.
Despite the announced end to the fuel-for-crude swaps, Nigeria has yet to send the crude cargoes it still owes for previous fuel imports, and this could take months, traders and industry players said.
“Swaps will ultimately stop but not yet. We are getting our swaps crude cargo in October at the earliest,” one major market player told Reuters.
By Charles Kennedy for Oilprice.com
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