The Nigerian National Petroleum Company Limited (NNPCL) has requested an additional ₦1.19 trillion subsidy refund for July 2024, citing exchange rate fluctuations and joint venture taxes on Premium Motor Spirit (PMS) imports. However, state governments have expressed concerns about the company’s accounting practices, as revealed in the September 2024 Federation Account Allocation Committee (FAAC) Postmortem Sub-Committee report.
According to the report, exchange rate differentials stood at ₦4.56 trillion in June 2024 and increased to ₦5.31 trillion by July 2024. NNPCL attributed this rise to changes in foreign exchange rates and unresolved subsidy payments from previous months. This growing cost raises further concerns about the sustainability of the current fuel subsidy system and its impact on Nigeria’s national revenue.
NNPCL Faces Scrutiny Over Subsidy Claims
The FAAC Sub-Committee has raised red flags regarding NNPCL’s accounting, specifically the inclusion of ₦1.19 trillion as a “balance brought forward,” which contributed to the total ₦5.31 trillion subsidy claim. This amount was not included in earlier FAAC reports, leaving it unrecognized during previous discussions.
The Sub-Committee has recommended that NNPCL resubmit this figure for consideration at the next FAAC plenary. Additionally, NNPCL was directed to provide detailed information on PMS import volumes, pricing, and sales values, which were omitted from earlier reports, preventing full justification of the exchange rate differentials.
Missing Details and Transparency Issues with NNPCL’s Claims
Further scrutiny revealed that NNPCL had reported an outstanding claim of ₦4.34 trillion as of June 2024, linked to exchange rate differentials, but crucial details such as PMS volumes, pricing, and sales values were missing. The FAAC Sub-Committee has demanded that NNPCL provide these essential details for a more thorough review.
The government’s ongoing subsidies on fuel imports remain a major concern, as despite claims of subsidy removal, the NNPCL’s actions suggest otherwise. NNPCL clarified that the ₦4.71 trillion earlier claimed was just an estimate, with the final figure at ₦4.34 trillion, which increased to ₦5.31 trillion by July 2024.
Continued Fuel Subsidy Debate and Economic Impact
This development highlights the government’s continued support for fuel imports, despite President Bola Tinubu’s declaration in May 2023 that subsidies had been eliminated. The International Monetary Fund (IMF), World Bank, and other institutions have raised concerns over the quiet reintroduction of fuel subsidies. In fact, government documents reveal a planned expenditure of ₦5.4 trillion on fuel subsidies for 2024, nearly identical to the amount requested by NNPCL.
Despite efforts to reform the subsidy system, the government’s expenditures on fuel subsidies have continued to rise. Between January and June 2023, the Federal Government spent ₦3.6 trillion on subsidies, far exceeding the ₦2 trillion spent in 2022.
The withholding of NNPCL’s 2023 dividend to cover fuel subsidies further emphasizes the financial strain caused by these payments. Moreover, President Tinubu’s repeated petrol price hikes—from ₦175 per litre in May 2023 to ₦1,060 in October 2024—are intensifying the financial pressure on Nigerians, contradicting his campaign promises to reduce fuel prices.
