The Nigerian National Petroleum Company Limited (NNPCL) has started the process of settling its massive $6 billion debt to oil suppliers, according to the Nigerian government.
The announcement was made by Wale Edun, Nigeria’s Minister of Finance and Coordinating Minister for the Economy, during a meeting with investors in Washington, DC, on Wednesday.
Edun assured investors that the NNPCL is taking active steps to address the financial strain that has been weighing on the company due to its indebtedness to oil suppliers.
“The NNPCL has commenced the process of paying down its debt,” Edun said during the meeting.
This move marks an important step in the company’s efforts to stabilize its financial position after months of grappling with the high costs of maintaining fuel supply.
The NNPCL, which has long been a critical player in Nigeria’s oil industry, admitted earlier this year that it was under significant financial pressure. The company’s debt to oil suppliers has been a heavy burden, with over $6 billion owed.
The debt came as a result of the rising costs associated with sustaining fuel supply in Nigeria, a country where the energy sector plays a central role in the economy.
Fuel subsidies, which were officially removed by the government on May 29, 2023, had also left a lasting impact on the company’s finances.
Although the removal of the petrol subsidy was a key government reform aimed at easing the strain on public funds, it created additional challenges for the NNPCL.
According to Edun, the end of the petrol subsidy did not completely solve the NNPCL’s financial problems.
He explained that while the government no longer bears the cost of petrol subsidies, the NNPCL has had to deal with a foreign exchange subsidy that has created another layer of financial burden.
“In terms of NNPC and their situation, the reality is that although the subsidy was removed on May 29, 2023, and is no longer on the government’s balance sheet, it did rear its head—not in terms of petrol subsidy, but foreign exchange subsidy, which was borne elsewhere, mainly by NNPC,” Edun said.
This foreign exchange subsidy, which covers the gap between the official exchange rate and the cost of importing fuel in dollars, has put significant strain on the company’s finances.
Despite these challenges, the NNPCL appears to be making progress.
Wale Edun reassured investors that the company now has a clear route to paying down its massive debt.
He stated that the payment process had already begun and expressed confidence that the NNPCL would soon be in a much better financial position.
“I think what I can say about their situation now is that they have a route to paying down their payables, and I’m sure that in no time, they will start,” Edun said.
“From what I understand, they have even commenced the process of paying down their payables.”
The NNPCL’s current debt situation can be traced back to years of financial challenges that have affected Nigeria’s oil and gas sector.
For decades, Nigeria’s reliance on oil exports as the main source of revenue has made the country vulnerable to fluctuations in global oil prices. This has often created periods of financial difficulty for the NNPCL, particularly when oil prices are low.
In addition, fuel subsidies have long been a controversial issue in Nigeria. While these subsidies were intended to keep fuel prices low for Nigerian consumers, they have often led to significant financial losses for the NNPCL.
The removal of the subsidy last year was part of a broader government strategy to reduce Nigeria’s reliance on fuel subsidies and improve the country’s fiscal health.
However, the transition has not been smooth, and the NNPCL has had to navigate a complex set of challenges, including the foreign exchange subsidy.