NNPCL's Subsidy Request of Over N1trillion Sparks Accountability Concerns

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The Nigerian National Petroleum Company Limited (NNPCL) has come under scrutiny following its request for an additional subsidy refund of N1.19 trillion. This amount, linked to exchange rate differentials on Premium Motor Spirit (PMS) importation and joint venture taxes, has sparked significant concerns among state governments and stakeholders.


The Federation Account Allocation Committee (FAAC) Postmortem Sub-Committee’s report for September 2024 revealed that exchange rate differentials stood at N4.56 trillion as of June 2024 but rose to N5.31 trillion by July. The NNPCL attributed this increase to currency fluctuations and unresolved subsidy payments from previous months. However, the FAAC Sub-Committee flagged inconsistencies in the NNPCL’s accounting practices, particularly regarding the inclusion of N1.19 trillion as a balance brought forward without prior acknowledgment in earlier FAAC reports.

Concerns Over Accounting Practices
The Sub-Committee’s report highlighted that the N1.19 trillion claimed by the NNPCL as under-recovery for June and July 2024 was included as an opening balance in its financial submissions. The committee emphasized that this figure had not been part of previous FAAC reports, raising questions about transparency and accountability.

During a September meeting, the NNPCL clarified that the amount represented actual under-recovery adjustments and proposed resubmitting the figure for consideration at the next plenary. The FAAC Sub-Committee recommended the NNPCL provide a more detailed breakdown to facilitate proper evaluation.

 Missing Documentation and Transparency Issues
Further investigation revealed that as of June 2024, the NNPCL reported an outstanding claim of N4.34 trillion tied to exchange rate differentials. However, critical details—such as PMS import volumes, pricing, and sales values—were absent. This lack of documentation has delayed the reconciliation process, with the FAAC Sub-Committee urging the NNPCL to submit comprehensive data for future reports.

The Revenue Mobilisation, Allocation, and Fiscal Commission also noted that the discrepancies in the NNPCL’s submissions made it challenging to justify the claims. The Sub-Committee emphasized the need for enhanced transparency and accountability in subsidy-related reporting to ensure the integrity of the Federation Account.

 Broader Implications of Subsidy Payments
The ongoing controversy over subsidy payments underscores broader fiscal challenges for the Nigerian government. While President Bola Tinubu announced the removal of fuel subsidies in May 2023, the NNPCL’s recent demands suggest a quiet reintroduction of these subsidies. According to reports, the Federal Government’s projected spending on fuel subsidies for 2024 is approximately N5.4 trillion, with the NNPCL’s claims accounting for 98.33% of this figure.

Between January and June 2023, N3.6 trillion was spent on subsidies—nearly double the N2 trillion spent in 2022. The Medium-Term Expenditure Framework (MTEF) for 2024 acknowledged the adverse impact of subsidy payments on oil revenues, noting that the government withheld the 2023 final dividend from the NNPCL to offset subsidy costs.

Rising Fuel Costs and Economic Impact
Despite promises to reduce fuel prices during his campaign, President Tinubu has overseen a steep increase in petrol prices, rising from N175 in May 2023 to N1,060 in October 2024—a 505.71% hike. This surge has exacerbated the economic challenges faced by Nigerians, with many citizens expressing frustration over the government’s handling of the issue.

Conclusion
The dispute over the additional N1.19 trillion subsidy request highlights significant gaps in transparency and accountability within the NNPCL’s reporting processes. It also underscores the broader fiscal strain imposed by subsidy payments, which continue to weigh heavily on the Federation Account and the Nigerian economy. As stakeholders demand greater clarity and accountability, the resolution of these issues will be critical to restoring public trust and ensuring sustainable fiscal policies.

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