The Nigerian downstream oil sector is grappling with a series of disputes between the Nigerian National Petroleum Company Limited (NNPC) and independent petroleum marketers. At the heart of the contention are demands by the NNPC for marketers to top up payments for pre-ordered fuel in line with recent price increases, potentially forfeiting their allocations if they fail to comply. The NNPC maintains that this is standard contractual procedure in a deregulated market, asserting that marketers can opt for refunds if they are unable to meet the adjusted prices. This policy has sparked pushback from the Independent Petroleum Marketers Association of Nigeria (IPMAN), who argue that the sudden price adjustments leave them stranded and unable to recoup their investments, disrupting business operations in the volatile downstream sector.
Further exacerbating the tension is the issue of unpaid loading tickets. IPMAN alleges that its members have paid for fuel through the NNPC’s online portal but have not been able to lift the corresponding volumes. They have appealed to the NNPC Group Chief Executive Officer to expedite the processing of these outstanding tickets, emphasizing the significant financial value tied up in these delayed transactions. This backlog of unpaid tickets, coupled with the demands for price top-ups, further constrains the operating capacity of independent marketers, potentially threatening fuel distribution networks across the country. While the NNPC acknowledges receiving refund requests and confirms their ongoing processing, the delay in resolving these payment discrepancies continues to fuel anxiety within the marketing sector.
Adding to the complexity of the situation is the unresolved matter of unpaid petroleum equalization funds. IPMAN claims that the NNPC owes its members approximately N25 billion under this now-defunct fund, a significant sum that further limits their financial flexibility. While the NNPC clarifies that it is not responsible for managing or disbursing these funds, attributing that responsibility to the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), the marketers’ claims remain unresolved. The original purpose of the Petroleum Equalisation Fund was to ensure uniform fuel prices nationwide by compensating marketers for transportation costs to remote areas. However, following deregulation and the removal of fuel subsidies, the fund was dissolved, leaving behind a legacy of outstanding claims.
These unresolved financial matters create significant challenges for independent marketers, hindering their ability to effectively operate in Nigeria’s deregulated fuel market. IPMAN argues that these outstanding payments create liquidity problems, limiting their competitiveness and affecting the stability of the fuel distribution chain. They warn that without prompt resolution, the nation’s energy security could be compromised. The marketers insist that clearing the outstanding tickets and settling the equalization arrears would alleviate financial pressures and enable them to compete more effectively in the deregulated market. This improved liquidity would, in turn, contribute to a more stable distribution network, reducing price volatility and ensuring consistent fuel supply across the country.
The disputes highlight the ongoing challenges within Nigeria’s downstream oil sector even after the removal of fuel subsidies. The fluctuating fuel prices, increasing operating costs, and infrastructural bottlenecks create a complex and unpredictable business environment for marketers. Analysts caution that if these issues remain unaddressed, they could lead to significant disruptions in fuel distribution, potentially resulting in fuel scarcity and even higher pump prices in some regions. The ongoing tensions underscore the delicate balance that must be struck between ensuring the financial viability of the NNPC and addressing the legitimate concerns of independent marketers who play a crucial role in the nation’s fuel supply chain.
Meanwhile, in a separate development focused on revitalizing domestic refining capacity, the NNPC has engaged UOP, a prominent international refining technology firm, to assess the Port Harcourt Refinery for potential private sector participation under a technical and equity partnership model. This move has been welcomed by the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), who see it as a positive step towards reviving the refinery and boosting local fuel production. The assessment contract signals a commitment to modernizing and optimizing the refinery’s operations, a crucial step towards reducing Nigeria’s reliance on imported fuel and enhancing its energy security. This initiative, while distinct from the disputes with independent marketers, highlights the multifaceted challenges and opportunities within Nigeria’s downstream oil sector as it navigates the complexities of deregulation and seeks to enhance its domestic refining capacity.
