The NNPC has terminated crude swap contracts with foreign refiners.

The Direct Sale Direct Purchase (DSDP) contracts between Nigerian National Petroleum Company (NNPC) Limited and international refiners and trading consortiums have been terminated, according to Mallam Mele Kyari, Group Chief Executive Officer of NNPC Limited.

Kyari gave a statement to Reuters over the weekend. He declared that the NNPC would now import gasoline in cash. He also disclosed that Nigerian private oil marketing firms would start importing gasoline as early as this month.

However, Independent Petroleum Marketers Association of Nigeria (lPMAN) called on President Bola Tinubu to walk his talk on the complete deregulation of the downstream petroleum sector as the elimination of fuel subsidies continues to spark vehement discussion across the nation.

According to Reuters, Kyari stated, “We virtually terminated all DSDP contracts during the past four months. Additionally, we now have a free-standing procedure that allows us to pay cash for imports.

“NNPC has never before announced that it is ending crude swap arrangements. Since private enterprises import the majority of the fuel, NNPC will be able to pay for its purchases in cash by importing less gasoline.

The action was a part of Tinubu’s attempts to de-regulate the gasoline industry and lessen the financial strain of government subsidy payments.

Since 2016, NNPC had been importing gasoline from groups of international and domestic trading companies and paying them back with crude oil through DSDP contracts since it lacked the funds to do so on a cash-and-carry basis.

Nigeria is the largest producer of crude oil in Africa, yet it imports the majority of its processed goods since its refineries are in disrepair.

Due to a considerable decline in oil production last year and elevated global fuel prices brought on by the conflict in Ukraine, NNPC’s debt to traders increased. According to a September 2022 NNPC report to the Federation Account Allocation Committee, it owed the consortiums nearly $2 billion, according to Reuters.

According to a direct industry source, cited by Reuters, NNPC was still allocating crude for fuel swaps for July loading, albeit at a lower rate than in prior months.

NNPC assigned crude to the swap contracts held by the consortiums, according to its report on March’s crude oil loadings.

The NNPC’s monopoly on gasoline supplies was about to break, according to Kyari, and private companies may begin importing as early as this month. He continued by saying that as of Friday, Nigeria’s total output of crude and condensate was 1.56 million barrels per day (bpd).

Due to widespread oil theft and unlawful processing, Nigeria has had difficulty meeting its OPEC oil quota of 1.742 million bpd. This has led to concerns about Nigeria’s ability to supply the 650,000 bpd newly-opened Dangote Refinery. The refinery will get 300,000 bpd of oil from NNPC under a contract.

The pump price of gasoline was nearly doubled by NNPC last week, going from N195 per litre to N488 to N557 nationwide. The development followed the announcement by Tinubu during his inaugural address on Monday that fuel subsidy was “gone”.

Tinubu promised to re-channel the expected savings to education, health and other sectors. But the development did not go down well the Nigeria Labour Congress (NLC), which described the new pricing template as vexatious.

Nigeria Labour Congress (NLC) had expressed displeasure over the, describing it. NLC has announced plan to commence a nationwide strike from Wednesday. IPMAN: For Subsidy Removal to Make Sense, FG Must Break NNPC’s Monopoly on Importation IPMAN called on Tinubu to walk his talk on the total deregulation of the downstream of the petroleum sector.

In a statement issued by IPMAN and signed by its president and national secretary, Debo Ahmed and Chief John Kekeocha, the association demanded that Tinubu move quickly to ensure that the national oil company’s exclusive right to import gasoline was violated.

That followed contrasting views on the newly imposed price rise by NNPC, the product’s sole importer. The four NNPC refineries, with a combined daily refining capacity of 445,000 barrels, had not been operating at their full potential, and the recently-commissioned Dangote refinery, with a daily capacity of 650,00 barrels, had not yet begun operations.

However, IPMAN advised Tinubu to make sure that players from the downstream sector other than NNPC were permitted to partake in the importation of petrol into Nigeria.

IPMAN stated, “The primary essence of removing subsidy is to free the market and make it competitive.” it explained that allowing other interested parties into the petroleum supply network, either through local refining or importation, will guarantee adequate production and supply and ultimately crash prices.

“This will precipitate reasonable reductions in the high price that is being witnessed at this initial take off,” IPMAN stated.

The statement also enjoined the federal government to ensure that Nigerians at the receiving end of the subsidy removal felt the dividends in the areas of infrastructure development, health sector, as well as well as education and basic social amenities.

The statement said, “As the NNPC continues to justify its price template for Premium Motor Spirit (PMS), IPMAN wishes to lend its voice in support of the current removal of the long awaited petroleum subsidy, which had lingered for more than 20 years.

“It goes a long way to demonstrate the very strong will and dexterity that President Bola Ahmed Tinubu has in his promise to liberate Nigerians from perpetual indebtedness and easy borrowing, which has jeopardised all efforts for reasonable progress in the country.

“It is our belief and hope that the NNPC will ensure that the product is made available for Nigerians and that the NMDPRA ensures adequate monitoring and distribution, making sure that the policy takes place seamlessly.

“However, it’s important to state here that the primary essence of removing subsidy is to free the market and make it competitive. This is by allowing other interested parties into the petroleum supply network.

“This is either by engaging in importation or local refining. It’s the duty of government to ensure that all bottlenecks and frustrations in this regard are removed so that adequate productions and supplies will eventually precipitate reasonable reductions in the high price that is being witnessed at this initial take off.”

IPMAN stated that while many Nigerians welcomed the policy “with a pinch of salt”, it believed that the constraining sacrifices of the people in “swallowing this bitter pill” will be compensated with obvious and empirical proofs of how the dividends of the subsidy removal positively impacted their lives.

The group promised to align with the present administration in the “social contract” by playing according to the rules and believing that the policy will be a milestone in repositioning Nigeria’s ailing economy.

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