The Nigerian National Petroleum Company Limited has requested an additional subsidy refund of N1.19 trillion for July 2024, citing exchange rate differentials on Premium Motor Spirit importation and joint venture taxes
The report revealed that exchange rate differentials stood at N4.56tn as of June 2024 (due to under-recovery on petrol imports between August 2023 and June 2024), but this figure increased to N5.31tn by July 2024.
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The NNPCL attributed the rise to fluctuations in foreign exchange rates and unresolved subsidy payments from previous months.
The total figure adds to concerns over the fiscal impact of subsidy payments on the Federation Account.
Exchange rate fluctuations and the rising cost of importing PMS have continued to strain government revenues, raising questions about the sustainability of the partial subsidy framework.
Committee raises concerns
The FAAC Sub-Committee raised concerns over NNPCL’s accounting practices, noting discrepancies in the figures submitted.
The NNPCL’s report included N1.19tn as a balance brought forward, contributing to the overall claim of N5.31tn.
However, the Sub-Committee noted that this amount had not been included in earlier FAAC reports and was therefore not recognised in its deliberations.
The report read, “As of June 2024, the Exchange Rate Differentials stood at N4,558,597,379,030.6. This amount increased to N5,309,418,715,637.13 as of the July 2024 Federation Account.
“Note that NNPCL’s request for the application of Weighted Average Rate covers the period August to June 2024. Also, recall that all outstanding payments against NNPCL as of May 2024 were referred to the Presidential Alignment Committee for reconciliation.
“However, the Sub-Committee observed that NNPCL in their report included the sum of N1,186,540,693,485.36 as an amount brought forward totalling N5,309,418,715,637.13 in their ledger. FAAC Postmortem did not recognize the Balance Brought Forward because it was not included in the FAAC report earlier submitted.”
Missing documentation
Further scrutiny of the NNPCL’s claims revealed additional issues. Minutes of a previous FAAC meeting indicated that as of June 2024, the NNPCL had reported an outstanding claim of N4.34tn against the Federation.
The claim, which was tied to exchange rate differentials, lacked essential details, including the volume of PMS imported, pricing, and sales values.
Mobilisation, Allocation, and Fiscal Commission stated that the omission of these details made it difficult for the Sub-Committee to justify the figures submitted.
Consequently, the sub-committee directed the NNPCL to provide all relevant information to enable further assessment of its claims.
The FAAC Postmortem Sub-Committee has emphasised the need for transparency and accountability in subsidy-related reporting.
Between January and June 2023, the Federal Government spent about N3.6tn on fuel subsidy, which was far more than the N2tn spent for the entire year of 2022.
In the approved Medium-Term Expenditure Framework, the Federal Government admitted that the petrol subsidies have remained a major challenge.
It noted that the final 2023 dividend for the Federal Government from the NNPCL was withheld to settle fuel subsidies.
The MTEF document noted, “Despite recent reforms, petrol subsidies continue to have a significant adverse impact on oil revenues. Recently, the 2023 final dividend due to the federation was withheld for payment of fuel subsidies.”
