By Ezekiel David
President Bola Tinubu has approved the Nigerian National Petroleum Company (NNPC) Ltd.’s request to use its 2023 final dividends to cover petrol subsidy payments.
This decision comes as the company faces a massive financial burden due to the rising cost of subsidizing fuel.
The NNPC informed President Tinubu that it would be unable to remit taxes and royalties to the federation account due to the “subsidy shortfall/FX differential.” The company’s financial forecast shows that the cumulative petrol subsidy bill from August 2023 to December 2024 will reach N6.884 trillion.
This leaves NNPC unable to remit N3.987 trillion in taxes and royalties.
“Subsidy removal notwithstanding, NNPC is still saddled with the burden of financing PMS imports to guarantee energy security to the nation,” NNPC stated in a document seen by The Cable.
While the removal of the petrol subsidy in June 2023 initially saved the federation N400 billion monthly, the devaluation of the naira has significantly increased the NAFEX exchange rate. This, in turn, has led to a surge in the subsidy bill. NNPC’s fuel importation costs became negative in August 2023, reaching N833.68 billion by April 2024.
To support NNPC’s cash flow, President Tinubu has also sanctioned the suspension of 2024 interim dividends. The NNPC projects that subsidy costs will exceed N5 trillion in 2024. The company utilizes a “derived FX rate” to keep petrol prices within the N600-N700 per litre range, with the difference between this rate and the official exchange rate representing the “subsidy/FX differential.”
(Source: Arise)