NNPC: Transparency and Open Communication Imperative
By Umar Farouk Bala
After months of denying responsibility, the Nigerian National Petroleum Company (NNPC) finally acknowledged that it had accumulated significant debts to its international fuel suppliers amidst prolonged petrol shortages and skyrocketing prices of Premium Motor Spirit (PMS).
The NNPC revealed that it had amassed an “unsustainable” level of debt to international suppliers, primarily due to financial difficulties caused by escalating fuel subsidy costs.
The rising cost of the petrol subsidy is mainly attributed to the sharp decline in the value of the Naira against the US Dollar, which has severely impacted NNPC’s financial stability. The company warned that this financial pressure jeopardizes its ability to sustain fuel supplies and poses a significant risk to the country’s overall fuel security.
This crisis has been exacerbated by the naira’s depreciation against the dollar, coupled with surging global crude oil prices and other associated costs, making it increasingly challenging for the NNPC to manage its ballooning debt commitments.
Despite international news outlets breaking the story in the first quarter of this year, the NNPC had repeatedly denied that the prolonged fuel queues across the country were a result of its outstanding debt. The company consistently maintained this position from when the issue first surfaced.
On various occasions since the debt issue came to light, the NNPC attributed the persistent fuel queues to adverse weather conditions, such as thunderstorms, flooding, and poor road infrastructure, deflecting attention from the underlying debt problem.
Just a month ago, the NNPC vehemently denied media reports that it had accumulated a staggering debt of up to $6.8 billion to international oil traders, dismissing such claims as untrue.
However, the NNPC later acknowledged that conducting oil trading on credit is standard practice, implying that owing money to international traders is not unusual. In effect, the company conceded that outstanding debts are a normal part of its business operations.
The NNPC clarified that its subsidiaries are settling debts on a first-come, first-served basis, meaning that the oldest outstanding debts are being paid off first in an effort to manage its financial obligations.
“The NNPC Ltd. does not owe the sum of $6.8 billion to any international trader(s). In the oil trading business, transactions are carried out on credit, so it is normal to owe at one point or the other,” the company stated.
“But NNPC Ltd., through its subsidiary, NNPC Trading, has many open trade credit lines with several traders. The company is paying its obligations on a first-in-first-out (FIFO) basis,” it added.
Fuel queues, which had been a familiar sight in Abuja and surrounding states, have now spread to Lagos and other parts of the country, with the crisis showing no signs of abating after over three weeks.
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Fuel prices have surged far beyond the official rates set by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), with some areas seeing prices soar to as much as N1,200 per liter, a significant deviation from regulated prices.
In a surprising turn of events, the NNPC finally acknowledged its debts through a statement issued by Olufemi Soneye, its Chief Corporate Communications Officer. The statement revealed that the accumulated debts were exerting significant financial strain on the organization.
“NNPC Ltd. has acknowledged recent reports in national newspapers regarding the company’s significant debt to petrol suppliers. This financial strain has placed considerable pressure on the company and poses a threat to the sustainability of fuel supply.
“In line with the Petroleum Industry Act (PIA), NNPC Ltd. remains dedicated to its role as the supplier of last resort, ensuring national energy security. We are actively collaborating with relevant government agencies and other stakeholders to maintain a consistent supply of petroleum products nationwide,” Soneye said.
The NNPC also recently revealed that the federal government owes it N7.8 trillion for petrol subsidies. This announcement came after the company’s earlier denial of the existence of such subsidies. In fact, just a few months ago, the NNPC refuted claims that it inflated subsidy claims by N3.3 trillion, labeling the reports as “ridiculous.”
President Bola Tinubu later approved a request by the NNPC to use the 2023 final dividends due to the federation to cover the cost of the petrol subsidy. However, NNPC’s Chief Financial Officer, Umar Ajiya, clarified that the company is only covering the shortfall between the NNPC and the federation for petrol importation, not necessarily paying off the subsidy.
After initially denying the claims, Ajiya later told Bloomberg, after the company announced its results, that the NNPC is owed N7.8 trillion ($4.9 billion) by the federal government in subsidy debts from January to July.
The NNPC has faced criticism for its lack of transparency and inconsistent communication regarding its internal affairs, including its financial struggles and subsidy debts. Despite initially denying the existence of subsidy debts, the NNPC later admitted to owing both international oil traders and the federal government. The company’s inconsistent messaging has led to confusion and mistrust among Nigerians.
To regain public trust, the NNPC must improve its public relations strategy by providing clear and timely information about its operations, financial status, and decision-making processes. By doing so, the NNPC can promote transparency, accountability, and better understanding among stakeholders.
In conclusion, the NNPC’s journey towards restoring public confidence hinges on an open dialogue with Nigerians. Transparency is no longer optional; it is imperative in ensuring that the public remains informed and engaged in the country’s energy sector challenges. By fostering better communication, the NNPC can mitigate the fallout from financial instability while solidifying its role in safeguarding Nigeria’s energy security.
