NNPC Spent N1.82 Trillion on Fuel Subsidy Between January To May 2023 – Owes N3.73 Trillion
The Nigerian National Petroleum Company (NNPC) Limited has revealed that it spent a whopping N1.82 trillion on fuel subsidy payments in the first five months of 2023. The state oil firm also disclosed that it owes N3.73 trillion in subsidy arrears as of June 2023.
Fuel subsidy or under-recovery is the difference between the landing cost of imported petrol and the regulated pump price. The NNPC bears the cost of subsidising petrol on behalf of the federal government, which has refused to remove or reduce the subsidy despite its negative impact on public finances.
According to its monthly presentation to the Federation Account Allocation Committee (FAAC) meeting on June 22, 2023, the NNPC said it paid N307.408 billion as petrol subsidy payment in May 2023 alone.
The document, obtained by TheCable, showed that from January 2023 to May 2023, petrol under-recovery totalled N1.828 trillion — 55 percent higher than the amount paid in the corresponding period of 2022.
Subsidy payments gulped N274.769 billion in January 2023, N477.742 billion in February, N415.381 billion in March, and N353.130 billion in April, respectively.
Meanwhile, under-recovery arrears amounted to N3.735 trillion and has been “carried forward”, the state oil firm said.
“The May 2023 subsidy amounted to N307,408,874,345.82, thus, the outstanding balance carried forward is N3,735,689,387,761.22 as of June 2023 FAAC,” the document reads.
“The sum of N495,497,600,000 was recovered from FGN/CBN subsidy support.”
The NNPC explained that the recovery consists of N400 billion from Central Bank of Nigeria (CBN) and federal government subsidy support as well as “$220,000 (80 percent of $275,000) Nigeria liquefied natural gas dividend”.
The NLNG dividend is converted at N434.08/$1, which is the FAAC-approved exchange rate for May 2023, NNPC said.
The NNPC also reported that it raked in N47.57 billion as domestic production sharing contract (PSC) crude oil and gas revenue in May 2023.
However, FAAC has claimed that the NNPC did not remit any money into the federation account in May 2023 from crude sales, royalties, and taxes.
The Committee made this allegation in a statement issued by Stephen Kilebi, Director of Press and Public Relations of the Federal Ministry of Finance, Budget and National Planning.
The statement said that FAAC was unable to share revenue among the three tiers of government for May 2023 due to NNPC’s failure to remit funds.
The NNPC’s huge subsidy payments and non-remittance of funds have raised concerns about the transparency and accountability of the state oil firm.
In July 2022, the NNPC transitioned to a limited liability company under the Petroleum Industry Act (PIA). The new law grants more operational and financial autonomy to the NNPC Limited.
However, some analysts have argued that the NNPC Limited still needs to be more open and responsive to public scrutiny and oversight.
They have also called for an end to fuel subsidy payments, which they say are unsustainable and wasteful.
According to Reuters, Nigeria’s NNPC spent $10 billion on fuel subsidy in 2022 alone.
The federal government has said that it will keep the petrol subsidy until mid-2023 and set aside N3.36 trillion ($7.5 bln) to spend on it.
However, many Nigerians are sceptical about the government’s commitment to remove or reform the subsidy regime.
They recall that President Bola Tinubu had declared an end to fuel subsidy payments in his inaugural speech on May 29, 2022 — a declaration that he later admitted was unplanned and spontaneous.
Since then, petrol prices have remained unchanged at N162 per litre despite fluctuations in global oil prices and exchange rates.
The NNPC has said that it will charge the federal government a fee to carry out petrol subsidy payments.
However, it is unclear how this fee will be determined and paid, and whether it will affect the NNPC’s remittances to the federation account.
The NNPC’s subsidy payments and non-remittance of funds have implications for the fiscal health and economic development of Nigeria.
They reduce the amount of revenue available for the federal, state and local governments to fund their budgets and provide public services.
They also distort the market signals and incentives for private investors to participate in the downstream sector of the oil industry.
They also expose the country to the risk of external shocks and volatility in the global oil market.
As Nigeria grapples with the challenges of economic recovery and diversification, it is imperative that the NNPC and the federal government address the issues of fuel subsidy payments and non-remittance of funds in a transparent and sustainable manner.
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