In a revelation that echoes the challenges faced by the Nigerian National Petroleum Company Limited (NNPCL), the Chief Financial Officer, Umar Ajiya, disclosed the reasons behind the company’s surprising decision to remit zero funds to the Federation Account in 2022. A 5.24-minute video released on Sunday sheds light on the intricate financial dynamics that led to this unprecedented situation.
According to Ajiya, the persistent burden of fuel subsidy payments significantly impeded the company’s ability to contribute taxes, royalties, and profits to the Federation Account, ultimately hindering its overall profitability. The documentary highlights how the subsidy regime acted as a roadblock to the growth potential of NNPCL until a new administration took the bold step to end it, rescuing the company from the brink of bankruptcy and ushering in a period of financial prosperity.
The video reveals that this strategic move allowed the oil firm to skyrocket its profits from N674.1 billion in 2021 to an impressive N2.54 trillion by the third quarter of 2022. Ajiya further elaborated on the impact of President Bola Tinubu’s declaration that the subsidy was gone, saving Nigeria an average of N400 billion every month. This decisive action redirected the company’s financial resources from subsidizing products to fulfilling its tax, royalty, and profit obligations.
The CFO acknowledged the harsh reality of remitting zero funds to the Federation Account in 2022, emphasizing that the company could not provide what it did not have. Ajiya revealed that, to sustain operations beyond June 2023, NNPC’s cash flows from other operations were used to compensate for product subsidies.
In essence, the unfolding narrative captures the intricate financial landscape shaped by the abolishment of fuel subsidies, ultimately paving the way for NNPCL’s resurgence in profitability.
