The Federal government has revealed its intentions to settle the N7.7 trillion fuel subsidy debt owed to the Nigerian National Petroleum Company Limited (NNPCL).
This subsidy amount represents the difference between the actual importation cost of Premium Motor Spirit (PMS) and the regulated retail price in Nigeria. Further, the Federal government disclosed its plans during a presentation by the Federation Account Allocation Committee (FAAC) at its February meeting in Abuja on Monday.
The committee highlighted the government’s debt to the NNPCL, which has grown to N7.7 trillion as of September 2024 due to exchange rate differences related to PMS importation. This situation arose after the full deregulation of the downstream oil sector.
Meanwhile, the FAAC document noted that this debt covers the timeframe from June 2023 to September 2024, during which the government kept fuel prices controlled despite increasing costs of petroleum products. Additionally, the document revealed the federal government is working on a structured plan to repay the N7.7 trillion debt within 210 days.
In August 2024, the NNPCL, in a claim labeled “Exchange rate differential on PMS and other joint venture taxes,” requested a refund of N4.71 trillion from the government for unpaid fuel importation costs.
Exchange rate differentials indicate the revenues accrued by the government or financial entities from fluctuations between two currencies over time. For example, if the exchange rate for $1 changes from N900 to N1,100, the exchange rate differential is the variation between these two figures.
The government supported fuel imports by covering the disparity between the estimated rates and the actual costs incurred by the NNPCL for importing fuel products into Nigeria. Hence, the variation in costs, which should be reflected in the product’s retail price and paid by end consumers, is the amount the national oil firm now seeks to recover from the government.
Similarly, the balance brought forward accounted for the additional claim resulting from updating the estimated under-recovery of PMS subsidies between 2017 and May 2023.
A breakdown inferred that the total expected sum of the exchange rate differential amounted to N10.499 trillion, but N2.756 trillion had been recovered in exchange rate differentials between November 2023 and September 2024. This brought the total outstanding amount to N7.74 trillion.
Furthermore, an analysis of the document indicated that the exchange rate differential from July to September 2024 was calculated based on the Nigerian Autonomous Foreign Exchange Market rate.
FAAC bemoans inconsistency in NNPCL revenue reporting
In the meantime, members of the FAAC committee expressed concerns regarding the inconsistent revenue reporting by the NNPCL.
The Ogun State Accountant-General, Tunde Aregbesola, raised this issue because of a decrease in revenue compared to the N662.9 billion reported in November 2023.
Aregbesola also noted that if the receivables were verified and included, they would make up a significant portion of the over N10 trillion, which could significantly influence the overall financial perspective.
In response, the FAAC Chairman, Oluwatoyin Madein, stated that this issue involved the NNPCL and NUPRC. She acknowledged members’ concerns, stressing the need to consider all relevant matters during the reconciliation process to ensure they are adequately addressed.
Moreover, Madein confirmed that the reconciliation effort, which is being coordinated by the Stakeholders Alignment Committee, aims to extend through December 2024.
