A major controversy has erupted between state governments and the Nigerian National Petroleum Company Limited (NNPCL) over an additional N1.19 trillion subsidy refund request for July 2024, raising serious questions about the national oil company’s accounting practices and the true status of fuel subsidies in Nigeria.
The latest development, revealed in the Federation Account Allocation Committee (FAAC) Postmortem Sub-Committee report for September 2024, shows that exchange rate differentials on Premium Motor Spirit importation have ballooned from N4.56 trillion in June to N5.31 trillion by July 2024. This dramatic increase has prompted strong pushback from state governments concerned about the transparency and accuracy of NNPCL’s financial reporting.
The controversy centers on NNPCL’s inclusion of N1.19 trillion as a balance brought forward in its latest calculations, an amount that state authorities note was conspicuously absent from previous FAAC reports. This discrepancy has led to heightened scrutiny of the oil company’s accounting methods and raised questions about the actual status of fuel subsidies in Nigeria.
During the September meeting with agencies, NNPCL attempted to justify the additional amount, explaining that the N1.19 trillion represents actual under-recovery costs, including adjustments for June and July 2024. However, this explanation has failed to satisfy the FAAC Sub-Committee, which has demanded that NNPCL resubmit these figures for further consideration at the next plenary session.
The situation has become more complex as further investigation reveals significant gaps in NNPCL’s documentation. As of June 2024, the company reported an outstanding claim of N4.34 trillion against the Federation, specifically related to exchange rate differentials. However, this claim lacks crucial details, including information about PMS import volumes, pricing structures, and sales values, making it impossible for oversight committees to verify the accuracy of these figures.
The Federal Commissioner of the Revenue Mobilisation, Allocation, and Fiscal Commission has highlighted these documentation gaps as a major obstacle to proper assessment of NNPCL’s claims. The absence of detailed information about fuel imports and pricing has complicated efforts to justify the substantial figures being submitted for reimbursement.
This controversy comes at a particularly sensitive time, as it appears to contradict President Bola Tinubu’s emphatic declaration that “subsidy is gone” during his inauguration in May 2023. The current situation, with NNPCL requesting massive refunds for under-recovery on fuel imports, suggests that some form of subsidy mechanism remains in place, albeit through a different structure.
The scale of the requested refund is particularly striking when compared to historical subsidy expenditures. The N5.31 trillion now being claimed by NNPCL represents approximately 98.33% of what the Federal Government had initially planned to spend on fuel subsidies for the entire year. This comes after the government had already spent about N3.6 trillion on fuel subsidies in just the first half of 2023, significantly exceeding the N2 trillion spent in all of 2022.
The impact of these ongoing subsidy payments is already being felt in government finances. The approved Medium-Term Expenditure Framework reveals that the Federal Government’s final 2023 dividend from NNPCL was withheld specifically to settle fuel subsidy payments, highlighting the continuing strain these payments place on national resources.
International financial institutions, including the World Bank and International Monetary Fund, have consistently challenged the government’s claims about subsidy removal, suggesting that Nigeria has quietly maintained a form of fuel subsidy. This latest development appears to support their assessment, indicating that while the structure of subsidy payments may have changed, the financial burden continues to impact national finances.
The FAAC Sub-Committee has emphasized the urgent need for greater transparency and accountability in subsidy-related reporting. The current discrepancies in NNPCL’s submissions have not only delayed the crucial reconciliation process but also raised broader questions about the management of Nigeria’s petroleum sector finances.
As this situation continues to unfold, state governments remain firm in their demand for more detailed documentation and clearer explanations from NNPCL. The resolution of this controversy could have significant implications for federal-state financial relations and the ongoing debate about fuel subsidy reform in Nigeria.
