The Nigerian National Petroleum Company Limited (NNPCL) has come under scrutiny for its remittance practices following the removal of the petrol subsidy in October 2024. Despite the anticipated revenue windfall, the World Bank reports that the NNPCL has only remitted 50% of the gains to the Federation Account, utilizing the remaining funds to offset legacy debt arrears. This revelation raises concerns about fiscal transparency and revenue management within the newly deregulated downstream petroleum sector. The World Bank estimates that the full revenue gains from subsidy removal amount to 2.6% of GDP in 2024, a significant sum that could bolster Nigeria’s development efforts. However, the NNPCL’s withholding of half these proceeds threatens to undermine the government’s fiscal consolidation plans and its capacity to invest in crucial infrastructure and social programs.
The subsidy removal, initially lauded by international financial institutions, was expected to free up substantial resources for development initiatives. However, its implementation was delayed due to public backlash against the resultant surge in petrol and commodity prices. Full deregulation finally took effect in October 2024, coinciding with the commencement of the Dangote refinery. Yet, the NNPCL delayed remittances to the Federation Account for three months, commencing transfers only in January 2025. This delay, coupled with the partial remittance practice, has cast a shadow over the fiscal benefits of the subsidy removal, prompting calls for greater accountability and transparency from the national oil company.
The World Bank’s analysis paints a complex picture of Nigeria’s revenue landscape. While gross revenues collected by major revenue agencies surged in 2024, largely due to increased FX-denominated revenues following the removal of the FX subsidy, the NNPCL’s contributions lagged significantly. The company remitted only N600 billion to the Federation Account Allocation Committee (FAAC) in 2024, a sharp decline from N1.1 trillion in 2023. This shortfall is attributed primarily to the implicit petrol subsidy that persisted until the third quarter of 2024. Despite the subsidy’s official removal, the NNPCL’s subsequent remittance practices raise questions about its commitment to maximizing revenue contributions to the Federation Account.
A key point of contention lies in the discrepancies between NNPCL’s claimed arrears and the Federation’s calculations. As of February 2025, the NNPCL claimed arrears of N7.8 trillion, while the Federation’s records indicated N6.1 trillion, resulting in a net discrepancy of N1.7 trillion purportedly owed to the NNPCL. This discrepancy further complicates the issue and underscores the need for a thorough and transparent audit of NNPCL’s finances. The World Bank advocates for a forensic audit to clarify these discrepancies and ensure accurate accounting of oil revenues. Alongside this, the adoption of standardized reporting templates for FAAC remittances is recommended to promote transparency and accountability.
The World Bank underscores the importance of resolving these financial ambiguities to ensure the successful implementation of Nigeria’s fiscal consolidation efforts. Full remittance of subsidy savings is crucial for maintaining fiscal stability and enabling the government to adequately fund critical social programs and infrastructure projects. The report emphasizes the need to strengthen public financial management systems and ensure that the benefits of the subsidy removal translate into tangible improvements in public service delivery. Failure to address these issues could undermine the potential benefits of the subsidy removal and limit the government’s capacity to invest in crucial development priorities.
In conclusion, the World Bank’s findings highlight a critical challenge facing Nigeria’s fiscal outlook. While the removal of the petrol subsidy holds significant promise for increasing government revenues, the NNPCL’s partial remittance practices threaten to undermine these gains. The discrepancies in reported arrears, coupled with the lack of full transparency in revenue accounting, necessitate immediate action to ensure that the benefits of subsidy removal are realized. The World Bank’s recommendations for a forensic audit, standardized reporting, and strengthened public financial management systems are critical for bolstering fiscal discipline and maximizing the impact of the subsidy reform on Nigeria’s development trajectory. Ultimately, ensuring full transparency and accountability in the management of oil revenues is paramount for achieving sustainable economic growth and improving the lives of Nigerians.
