The Nigerian National Petroleum Company Limited (NNPCL) has requested an additional N1.19 trillion subsidy refund for July 2024, citing exchange rate differentials on Premium Motor Spirit (PMS) importation and joint venture taxes.
This request has sparked concerns from state governments, who have raised questions about the NNPCL’s accounting practices and the transparency of its financial claims.
According to a report from The PUNCH, the findings are based on the Federation Account Allocation Committee (FAAC) Postmortem Sub-Committee report for September 2024.
The report reveals that exchange rate differentials for PMS imports stood at N4.56 trillion in June 2024, due to under-recovery on petrol imports from August 2023 to June 2024. By July 2024, this figure had increased to N5.31 trillion, further straining government finances.
The NNPCL attributed the increase in the subsidy figure to fluctuations in foreign exchange rates and unresolved subsidy payments from previous months, raising concerns over the fiscal burden on the Federation Account.
The rising cost of importing PMS continues to impact government revenues and has prompted renewed questions about the sustainability of the partial subsidy framework.
The FAAC Sub-Committee expressed concerns over discrepancies in the NNPCL’s submission, particularly regarding the inclusion of the N1.19 trillion as a balance brought forward.
The report noted that this amount had not been accounted for in previous FAAC reports, leading to its exclusion from earlier deliberations.
The report from the sub-committee read, “As of June 2024, the Exchange Rate Differentials stood at N4,558,597,379,030.6, which increased to N5,309,418,715,637.13 by July 2024.
However, NNPCL’s report included the sum of N1,186,540,693,485.36 as an amount brought forward, contributing to the total. This figure was not included in prior reports, and therefore, it was not recognised in FAAC’s discussions.”
The NNPCL clarified that the N1.19 trillion under-recovery amount, which included adjustments for June and July 2024, was used as the opening balance in their report. The sub-committee has since recommended that the NNPCL re-submit the figure for further consideration at the next FAAC plenary.
In addition to discrepancies in reporting, further scrutiny of NNPCL’s claims revealed gaps in critical documentation. A previous FAAC meeting had noted an outstanding claim of N4.34 trillion by the NNPCL, attributed to exchange rate differentials.
However, the report lacked essential details such as the volume of PMS imported, pricing, and sales values, making it difficult for the sub-committee to justify the figures submitted.
The Federal Commissioner of the Revenue Mobilisation, Allocation, and Fiscal Commission (RMAFC) stated that the absence of these details hindered the sub-committee’s ability to assess the validity of the claims.
The sub-committee has now instructed the NNPCL to provide all relevant information to enable a more thorough assessment of its subsidy claims.
The ongoing subsidy payments, particularly the discrepancies in the reported amounts, have raised questions about the long-term sustainability of the subsidy framework.
The NNPCL’s request comes at a time when the federal government has been grappling with the financial impact of fuel subsidies, which the administration of President Bola Tinubu had previously vowed to end.
During his inauguration in May 2023, President Tinubu declared that the “subsidy is gone,” signalling an attempt to remove the fuel subsidy barriers that have long hindered the nation’s economic growth.
However, the continuing subsidy claims by NNPCL suggest that the government is still supporting fuel imports by covering the difference between the projected rate and the actual costs incurred by the NNPCL for PMS imports.
This subsidy system has resulted in increased pressure on the Federation Account, as the government continues to absorb the cost differentials that would typically be passed on to consumers through higher petrol prices.
The FAAC Sub-Committee has emphasised the need for greater transparency and accountability in the reporting of subsidy-related claims.
The committee highlighted that the discrepancies in NNPCL’s submissions have delayed the reconciliation process, which had already been referred to the Presidential Alignment Committee.
The sub-committee also urged NNPCL to include comprehensive breakdowns of its PMS importation records and all outstanding amounts in future reports.
As the fiscal year progresses, the NNPCL’s subsidy claims continue to fuel debates over the viability of Nigeria’s fuel subsidy system and the broader implications for government revenues and economic policy.
The ongoing concerns over the NNPCL’s accounting practices suggest that resolving these issues may take time, with further scrutiny expected in the coming months.
