The Nigerian National Petroleum Company Limited (NNPCL) has informed the Federal Account Allocation Committee (FAAC) of an outstanding of N4.56 trillion for selling petrol at a subsidized price between August 2023 and June 2024.
This is according to documents from FAAC meetings in July and August, which were seen by TheWitness.
According to a report from a FAAC Post-Mortem Sub-Committee (PMSC) meeting, the outstanding amount is said to be unrecovered funds arising from exchange rate differentials on Premium Motor Spirit (PMS) importation.
The report read: “During the last FAAC Plenary meeting, the Sub-Committee reported that NNPCL claimed that the Federation was owing an unrecovered sum of N4,344,519,176,167.32 as of May, 2024 Federation Account arising from Exchange Rate Differentials. This amount has increased to N4,558,597,379,030.6 as of June, 2024.”
While reconciliation efforts are ongoing to resolve the outstanding balance, the Chairman of the Revenue Mobilization Allocation and Fiscal Commission (RMAFC), who presided over the subcommittee meeting, has formally requested detailed information from NNPCL management.
This information includes the volume of PMS imported, the pricing structure, and sales values, to substantiate the weighted exchange rate applied in the billing.
The report noted: “Accordingly, reconciliation is ongoing; however, the Chairman of the Commission, who chaired the meeting, had written to NNPCL management requesting the volume, price and sales value to justify the weighted exchange rate.”
The NNPCL’s claim raised concerns among the commissioners of finance from various states, prompting a call for further clarity and accountability.
During the meeting, the Commissioner of Finance from Akwa Ibom State sought clarification on the massive debt claimed by NNPCL and inquired about potential resolutions to the financial burden.
The Accountant-General of the Federation (AGF) and a representative from NNPCL responded during the meeting.
A copy of minutes of the meeting seen by TheWitness read: “Responding, the Accountant-General of the Federation (AGF) recalled that the matter was discussed at the FAAC Technical Session, held earlier in the day and the representative of NNPC Ltd explained that the company had approval to apply the ‘weighted average rate’ on PMS transactions in order to maintain its current price. She stated that the representative of NNPC Ltd also explained that, if the ‘floating rate’ was to be applied, the price of PMS would be higher than the current price.
“In his comment, the representative of NNPC Ltd informed members that there was a Federal Government directive that the ex-depot price of PMS be kept at N524.99 per litre. He explained that for the company to sell at that price, it must have to obtain Forex at N600/$, which was not the case.”
The Commissioner of Finance from Delta State expressed concerns about NNPCL’s decision to source U.S. dollars for transactions, particularly when the crude oil being sold was already denominated in the same currency. He emphasized the need for NNPCL to be more transparent and accountable in its operations.
Also, the Commissioner of Finance from Bayelsa State suggested that NNPCL should operate more independently as a corporate entity. He argued that this would allow the company to manage its transactions without frequent recourse to the Federation Account.
Although President Bola Tinubu announced the removal of fuel subsidies during his inaugural address on May 29, 2023, there have been strong indications that the government still spends billions on subsidies. However, the federal government and the NNPCL have consistently denied subsidy payments.
Despite denying subsidy payments, the Chief Financial Officer (CFO), of the NNPCL, Alhaji Umar Ajiya recently disclosed that the government pays the company to sell PMS at half price of the landing cost, which he referred to as a shortfall.
Ajiya stated that NNPCL has solely been managing 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, the national oil firm noted that the federal government incurred a debt of N5.1 trillion in under-recovery and energy security expenses for fuel importation in 2023.
The firm stated that the cumulative amount spent was used as expenses from crude oil supply for domestic use and other receivables on behalf of the federation after it instructed the company not to sell its PMS above a certain regulated price.
This total cost is made up of January to May 2023 under-recovery of N3.3 trillion and August-December 2023 energy security expense of N1.8 trillion.