Nigeria state oil firm insolvent, says minister

Wednesday, 14 July 2010

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Nigeria's state oil firm is insolvent, unable to pay debts of $5bn (£3.3bn), a government minister has said.

Junior Finance Minister Remi Babalola said the Nigerian National Petroleum Corporation had asked for help to cover its debts and fund its operations.

But the NNPC denied the claim and said the government was not paying its own debts to the firm.

Nigeria is a major crude oil producer and exporter but must import refined oil to meet its domestic needs.

"NNPC is insolvent as current liabilities exceeded current assets by 754bn naira ($5bn)," Mr Babalola said at a government finance meeting.

He said the NNPC owed about $3bn to Nigeria's Federation Account, which distributes oil money to varying levels of the country's government.

Discounts

The NNPC rejected Mr Babalola's claim and said it was able to meet its financial obligations.

"We cannot be classified as insolvent when we have healthy cash flow and we can pay for our crude and product import obligations," said NNPC spokesman Levi Ajuonuma.

He said the Nigerian government owed the company more than $7bn in subsidies "which if reimbursed would enable the NNPC to offset the... debt being owed the Federation Account Allocation Committee".

The NNPC is plagued by mismanagement and corruption, says the BBC's Caroline Duffield in Lagos.

Despite Nigeria being a major crude oil producer, it must buy almost all the oil it uses on the international market because its own refineries are insufficient and dilapidated.

The NNPC buys oil at international prices and sells it on to local marketeers at a big discount because Nigerians see cheap petrol as their birthright, says our correspondent.

President Goodluck Jonathan has promised to tackle corruption in the oil industry. He has sacked some officials from the NNPC and ordered an audit of the firm's accounts.

There is also legislation currently before the parliament which would bring sweeping reforms to Nigeria's oil and gas industry.