The Nigerian National Petroleum Company Limited (NNPCL) has put forward a request for an additional subsidy refund of N1.19 trillion for July 2024, citing substantial exchange rate differentials and joint venture taxes involved in the importation of Premium Motor Spirit (PMS), also known as petrol. This information comes as a result of findings published by The PUNCH, from the Federation Account Allocation Committee (FAAC) Postmortem Sub-Committee report for September 2024. This report highlighted that the exchange rate differentials have been progressively increasing, with the total estimated to have risen from N4.56 trillion in June 2024 to N5.31 trillion by July 2024. The rise is attributed to changes in foreign exchange rates and outstanding subsidy payments from previous periods, raising concerns regarding the fiscal implications these payment demands pose to the Federation Account.
State governments have expressed their dissatisfaction with the NNPCL over these financial claims, primarily questioning the company’s accounting practices. The scrutiny arises from discrepancies observed in the figures presented by the NNPCL, particularly regarding the inclusion of the N1.19 trillion as a balance brought forward, which was not found in previous FAAC reports. This lack of prior acknowledgment in related reports has led the Sub-Committee to challenge the reliability of the submitted data. The NNPCL’s presentation claimed this balance formed part of the overall N5.31 trillion it has requested, prompting recommendations for further substantiation and a potential resubmission for consideration in upcoming meetings.
Further investigations into the NNPCL’s claims have unveiled additional complications. The minutes from a prior FAAC meeting indicated that an initial outstanding claim of N4.34 trillion related to exchange rate differentials lacked supporting details, such as the volumes of PMS imported and their corresponding sales values. The omission of these critical figures hinders the Sub-Committee’s ability to validate the claims, leading officials to call for complete and detailed documentation in future reports. The insistence on transparency underscores the ongoing friction between state authorities and the NNPCL concerning public finance management, particularly amid concerns that the negative impact of subsidy payments continues to compromise government revenue.
The noticeable increase in subsidy amounts has sparked a heated debate over the sustainability of the subsidy framework that the Nigerian government has in place. In tandem with the monetary shortfall, confusion reigns regarding the validity and execution of claims made by the NNPCL, especially since the government has publicly announced the cessation of fuel subsidies under President Bola Tinubu’s administration. This declaration clashes with findings by global financial institutions that suggest implicit fuel subsidy provisions have quietly persisted, thereby questioning the true effectiveness and transparency of the economic reforms touted by the current administration.
Despite President Tinubu’s announcement that fuel subsidies had been abolished during his 2023 inauguration, data provided by economic analysts indicates that substantial funds continue to be allocated for these subsidies. The proposed economic stabilization plan put forth by the government in June outlined intentions to expend around N5.4 trillion on fuel subsidies. Alarmingly, the N5.31 trillion claimed by the NNPCL for petrol under-recovery almost aligns with the Federal Government’s suggested budget for fuel subsidies in the year, illustrating a stark contradiction between declarations of subsidy elimination and the financial reality facing the country.
Additionally, the government’s expenditures on fuel subsidies have surged dramatically, as evidenced by reports showing that between January and June 2023, nearly N3.6 trillion was spent, far exceeding the N2 trillion allocated for the entirety of 2022. This financial burden has been compounded by the withholding of the NNPCL’s final dividend to the federal government, which is intended to offset these subsidy costs. Therefore, the ongoing complexity surrounding fuel pricing, subsidy allocation, and economic policies should be underlined in strategic discussions moving forward, especially considering the severe price hikes and economic strain experienced by everyday Nigerians—despite the administration’s commitment to improving their standard of living post-election.
