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By Uche Usim
The Nigerian National Petroleum Company Limited (NNPC Ltd) has reported to the Federal Account Allocation Committee (FAAC) an outstanding debt of N4.56 trillion, accumulated from selling petrol at subsidised prices between August 2023 and June 2024.
According to documents from FAAC meetings held in July and August, obtained by Nairametrics, the debt stems from unrecovered funds due to exchange rate differentials on Premium Motor Spirit (PMS) importation. A report from the FAAC Post-Mortem Sub-Committee (PMSC) revealed that as of May 2024, NNPC Ltd claimed the federation owed N4.34 trillion, which escalated to N4.56 trillion by June 2024.
As reconciliation efforts continue, the Chairman of the Revenue Mobilization Allocation and Fiscal Commission (RMAFC), who led the subcommittee meeting, has formally requested comprehensive details from NNPC Ltd’s management. The requested information includes data on the volume of PMS imported, pricing structure, and sales values to substantiate the exchange rates applied in the billing.
The revelation has raised concerns among state finance commissioners, who are seeking further clarity and accountability. The Commissioner of Finance from Akwa Ibom State questioned the massive debt claimed by NNPC Ltd and inquired about potential resolutions to the financial burden.
During the meeting, the Accountant-General of the Federation (AGF) and a representative from NNPC Ltd responded to the concerns.
The AGF recalled that the issue was discussed earlier during the FAAC Technical Session, where NNPC Ltd explained that it was authorised to apply a ‘weighted average rate’ on PMS transactions to maintain current prices. The representative clarified that if the ‘floating rate’ were applied, the price of PMS would be significantly higher.
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Further discussions revealed that a Federal Government directive mandated NNPC Ltd to keep the ex-depot price of PMS at N524.99 per litre. The representative explained that selling at this price required obtaining foreign exchange at N600 per dollar, which was not feasible.
The Commissioner of Finance from Delta State voiced concerns over NNPCL’s decision to source U.S. dollars for transactions, especially since the crude oil being sold was already denominated in the same currency. He called for greater transparency and accountability in NNPCL’s operations.
Additionally, the Commissioner of Finance from Bayelsa State suggested that NNPCL should operate more independently as a corporate entity, allowing it to manage its transactions without frequent recourse to the Federation Account.
Despite President Bola Tinubu’s announcement of fuel subsidy removal during his inaugural address on May 29, 2023, there are strong indications that the government still spends billions on subsidies. However, both the federal government and NNPC Ltd have consistently denied making subsidy payments.
NNPCL’s Chief Financial Officer, Alhaji Umar Ajiya, recently disclosed that the government compensates the company for selling PMS at half the landing cost, which he referred to as a shortfall. He noted that NNPC Ltd has solely managed the shortfall in PMS imports between the company and the federation and has not disbursed any subsidies to marketers over the past nine months.
In its financial statement for the fiscal year ending December 31, 2023, NNPC Ltd reported that the federal government incurred a debt of N5.1 trillion in under-recovery and energy security expenses for fuel importation in 2023. This total cost includes N3.3 trillion in under-recovery from January to May 2023 and N1.8 trillion in energy security expenses from August to December 2023.
