Fuel Subsidy Removal: NNPC Pays Off $4.68 Billion Cash Call Debt to International Oil Companies

Fuel Subsidy Removal: NNPC Pays Off $4.68 Billion Cash Call Debt to International Oil Companies

The Nigerian National Petroleum Company Limited (NNPCL) announced that it has cleared its longstanding $4.68 billion cash call debt owed to five international oil companies (IOCs) operating in Nigeria.

This achievement follows the government’s decision to remove fuel subsidies on Premium Motor Spirit (petrol), a move that has allowed NNPCL to redirect funds towards its obligations.

During the 42nd Annual International Conference & Exhibition of the Nigerian Association of Petroleum Explorationists (NAPE) in Lagos, NNPCL’s Group Chief Executive Officer, Mele Kyari, highlighted the impact of President Bola Tinubu‘s decision to end petrol subsidies.

He described it as a crucial step in addressing the country’s economic challenges, despite the short-term difficulties, including inflation and higher commodity costs.

Kyari drew an analogy, stating that Nigeria’s reliance on fuel subsidies was like “smoking cigarettes,” suggesting the decision has positively contributed to the nation’s economic health.

“This decision, although initially challenging, was necessary to halt the harmful practice of petrol subsidies,” Kyari said. “When SUV drivers realize they’re spending N100,000 per tank, they’ll reconsider their habits. The public transportation system will likely see a resurgence, allowing Nigerians to use their resources more productively.”

With subsidies eliminated, NNPCL can focus on core upstream operations. In the past, cash call defaults strained Nigeria’s oil sector and hindered project funding.

With financial stability, NNPCL is positioned to drive increased energy production and contribute to Nigeria’s economic growth through investments in gas infrastructure, gas-based industries, and the national grid.

The issue of cash call debts has been a persistent challenge for NNPCL. These debts represent capital and operational funding needed for joint ventures with oil companies like Mobil, Chevron, Shell, TotalEnergies, and Agip.

Since the early 2000s, NNPCL’s financial struggles led to debt accumulation, impacting investor confidence and stalling growth in the upstream oil and gas sector.

By 2016, the debt reached critical levels, prompting a $5.1 billion repayment plan, later renegotiated to $4.68 billion.

Kyari is optimistic about the future, projecting significant industry transformation within three to four years. This achievement is expected to boost investor confidence, drive exploration, and support new developments across Nigeria’s energy landscape.