Nigeria’s debt to suppliers of Premium Motor Spirit, popularly called petrol, has surpassed $6bn, doubling what it was since early April, as the Nigerian National Petroleum Company Limited struggles to cover the gap between fixed pump prices and international fuel costs, six industry sources told Reuters.

Although this was swiftly described as false by NNPC on Thursday, the Reuters report stated that the national oil company began struggling early this year when late PMS payments surpassed $3bn.

Also read: NNPC to boost economy with $4bn gas projects

The company has still not paid for some January imports, traders said, and the late payments amount to between $4bn and $5bn. Under contract terms, NNPC is meant to pay within 90 days of delivery.

“The only reason traders are putting up with it is the $250,000 a month (per cargo) for late payment compensation,” one industry source said.

At least two suppliers already stopped participating in recent tenders after hitting self-imposed debt exposure limits to Nigeria, the sources said, meaning they will not send more PMS until they receive payments.

Traders thrive in risky environments, but they place limits on how much credit they allocate per trade in order to avoid too much exposure on one borrower. These limits vary by company based on their size and where they operate.

As a result, Nigeria’s tenders to buy gasoline in June and July were smaller, traders said. NNPC will import via tender about 850,000 tonnes in July, two of the sources said, down from the typical one million tonnes in previous months.

But when contacted by our correspondent and asked to react to the claims by traders as captured in the report, the spokesperson of NNPC, Olufemi Soneye described it as “false.”

He went ahead to say, “False. Did they name the marketers they claim we supposedly owe? Let them name them.

President Bola Tinubu announced an end to expensive fuel subsidies in May last year, allowing pump prices to triple. But NNPC capped pump prices shortly afterward as citizens chafed under rising cost of living.

The cap, coupled with a naira currency crash, allowed the subsidy to creep back, according to industry analysts, though NNPC has denied the return of PMS subsidy.

Analysts, NGOs and even government officials have slammed the subsidy for years as wasteful and corrupt. But Nigerians, who get few government services, have long seen cheap fuel as their right, especially in the current cost-of-living crisis.

Last week, deadly riots forced Kenya’s debt-burdened government to cancel planned tax rises, casting a shadow over efforts elsewhere to inflict any further pain on citizens stung by rising inflation.

Senegal’s energy subsidy bill remains high, at 3.3 per cent of GDP, while Egypt and Angola are also trying to axe subsidies to shore up state finances.

Nigeria, Africa’s largest oil exporter, imports virtually all its fuel due to years of neglect at its state-owned oil refineries. The newly opened 650,000 barrel-per-day Dangote refinery has not yet produced marketable petrol, and is selling other fuels abroad.

The country has few savings to fall back upon as corruption and wasteful spending have eaten up decades of oil revenues. Cash-strapped NNPC has also mortgaged much of its spot oil cargoes, limiting what it can sell for cash.

In late 2023, NNPC secured its biggest-ever oil-backed loan worth $3.3bn from Afreximbank and a consortium of traders, including Gunvor, and opens new tab, to shore up the country’s foreign exchange.