The Nigerian National Petroleum Company Limited (NNPCL) has reported an outstanding debt of N4.56 trillion to the Federal Account Allocation Committee (FAAC) for selling petrol at a subsidised price between August 2023 and June 2024.
This disclosure was made during FAAC meetings in July and August, according to documents obtained by Nairametrics.
A report from a FAAC Post-Mortem Sub-Committee (PMSC) meeting revealed that the debt stems from unrecovered funds due to exchange rate differentials on Premium Motor Spirit (PMS) importation. As of May 2024, NNPCL claimed that the Federation owed N4.34 trillion. This figure rose to N4.56 trillion by June 2024.
RMAFC Demands Detailed Information
In response to the substantial outstanding balance, the Chairman of the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) has formally requested additional information from NNPCL. This includes details on the volume of PMS imported, the pricing structure, and sales values to justify the exchange rate applied in the billing.
“Reconciliation is ongoing; however, the Chairman of the Commission has written to NNPCL management requesting the volume, price, and sales value to justify the weighted exchange rate,” the report noted.
State Finance Commissioners Seek Clarity
The NNPCL’s claim has raised concerns among state finance commissioners, who are calling for greater transparency and accountability. The Commissioner of Finance from Akwa Ibom State questioned the legitimacy of the massive debt and inquired about potential solutions to the financial burden.
In response, the Accountant-General of the Federation (AGF) and a representative from NNPCL explained that the company had received approval to apply a “weighted average rate” on PMS transactions to maintain current prices. They noted that applying a “floating rate” would result in higher prices for PMS.
The NNPCL representative also highlighted a Federal Government directive to keep the ex-depot price of PMS at N524.99 per litre, despite the company needing to source foreign exchange at N600/$, which was not always possible.
The Commissioner of Finance from Delta State expressed concern over NNPCL’s decision to source U.S. dollars for transactions, especially given that crude oil sales are already denominated in the same currency. He called for more transparency in NNPCL’s operations.
Similarly, 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 reliance on the Federation Account.
Ongoing Debate Over Subsidy Payments
Despite President Bola Tinubu’s announcement of fuel subsidy removal on May 29, 2023, there have been persistent indications that the government continues to spend billions on subsidies. However, both the federal government and NNPCL have consistently denied making subsidy payments.
Alhaji Umar Ajiya, Chief Financial Officer of NNPCL, recently disclosed that the government compensates the company to sell PMS at half the landing cost, which he referred to as a “shortfall.” He added that NNPCL has been managing this shortfall independently for the past nine months, without disbursing any subsidies to marketers.
NNPCL’s financial statement for the fiscal year ending December 31, 2023, reported that the federal government incurred a debt of N5.1 trillion in under-recovery and energy security expenses related to fuel importation. This total cost includes N3.3 trillion for under-recovery from January to May 2023 and N1.8 trillion for energy security expenses from August to December 2023.
NNPCL stated that these expenses were incurred after the government instructed the company not to sell PMS above a regulated price, thereby covering the shortfall through the Federation Account.
