Tinubu approves use of NNPC dividends for payment of petrol subsidy – Report

President Bola Tinubu has approved a request by the Nigerian National Petroleum Company (NNPC) Ltd to use the 2023 final dividends due to the federation to pay for petrol subsidy, a report has said.

TheCable in a report on Monday said Mr Tinubu also approved the suspension of the payment of 2024 interim dividends to the federation to help boost NNPC Ltd’s cash flow.

In addition, the report said the NNPC told Mr Tinubu it will be unable to remit taxes and royalties to the federation account for now because of the subsidy payments, which it termed “subsidy shortfall/FX differential”.

The development is coming on the heels of petrol scarcity in the country.

The exact amount of dividends that would be withheld could not be verified at the time of filing this report.

Mr Tinubu had, in his inaugural address on 29 May 2023, announced the removal of the subsidy to lift a major financial burden off the back of the government.

This development has caused hardship for many Nigerians with its attendant increase in the prices of goods and services.

Mr Tinubu’s announcement sparked the increase in fuel price from N197 to between N480 and N570, which immediately triggered a rise in transportation fares and prices of goods and services in the country.

In July 2023, the petrol pump price was subsequently reviewed upward to N617/litre at various outlets of the Nigerian National Petroleum Company Limited (NNPC Ltd).

In recent times, there have been concerns that the government had partly reintroduced petrol subsidy, unannounced, to keep the pump price at N617 given the continued fall in the value of naira against the dollar and the price of crude oil in the international market.

But the government repeatedly denied it.

At the time the Nigerian government said the decision to remove petroleum subsidy is a challenging one but a necessary move needed to promote long-term energy security and economic prosperity in the country.

In April, a former governor of Kaduna State, Nasir El-Rufai, said whether the government admits it or not, the landing cost of petrol shows that there is a form of subsidy being paid.

Nigeria’s Minister of Budget and Economic Planning, Atiku Bagudu, in a recent interview with PREMIUM TIMES, maintained that Mr Tinubu’s administration has scrapped subsidies on petrol.

He referred to the Petroleum Industry Act, which gave autonomy to the NNPC Ltd, as well as the policy decision of the Tinubu administration not to pay subsidy on petrol.

There is a “public policy decision, rightly, commendably and boldly, that we can’t as a nation afford fuel subsidy,” Mr Bagudu said.

Meanwhile, while Mr Bagudu insisted the Nigerian government is not paying subsidies on petrol, the International Monetary Fund (IMF), in a report said that the Nigerian government reintroduced petrol subsidy at the end of last year.

The IMF said subsidy payment is expected to gulp almost half of Nigeria’s projected oil revenue this year. The implicit subsidy will cost Africa’s largest crude producer an estimated N8.43 trillion of its projected N17.7 trillion of oil revenue, the IMF said in the report.

In a draft copy report of the Accelerated Stabilisation and Advancement Plan (ASAP) presented to Mr Tinubu by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun in June the government said fuel subsidy is projected to reach N5.4 trillion by the end of 2024.

This, it said, compares unfavourably with N3.6 trillion in 2023.

On Monday TheCable reported that NNPC Ltd cried out to Mr Tinubu in June that the subsidy payments were negatively impacting its cash flow and it was struggling to remain a “going concern”.

The company said it might not be able to sustain petrol imports because of the ballooning subsidy bill, which it blamed on “forex pressure”.

Mr Kyari, the group chief executive officer of NNPC Ltd, according to the report, informed the president that when the subsidy was removed, it led to monthly savings of N400 billion to the federation.

This, he said, enabled the company to remit its taxes and royalties totalling N2.032 trillion into a sequestered account at the Central Bank of Nigeria (CBN) as at January 2024.

He explained that the situation had continued to exert “undue pressure” on the NNPC, leading to its inability to remit royalties and taxes into the federation account.

Mr Kyari further said national energy security was being threatened as the NNPC might not be able to sustain petrol imports “beyond July 2024”.

Mr Kyari in making his case with the president, according to the report, said the company had implemented a number of strategies between August 2023 and April 2024 but the situation was getting out of hand.

The strategies included improving oil production by fighting theft and vandalism, debt rescheduling/forward sales, payment deferrals to suppliers and contractors, deferrals of non-critical projects, and debt recovery.

However, the situation was still not looking good as projections showed a consistent increase in cash flow deficit mainly because of the exchange rate.

Whereas an estimated N3.987 trillion in taxes and royalties will be due the federation account by December 2024, NNPC said it will still be owed N2.897 trillion after reconciliation of its obligations and subsidy shortfall.

“Mr Kyari requested that Tinubu should approve the utilisation of the final dividends due the federation for 2023 and deferment of the remaining interim dividends for 2024 to defray the subsidy costs.

“The president approved Kyari’s request on 6 June 2024,” the report said.

Olufemi Soneye, the chief corporate communications officer of the NNPC Ltd told PREMIUM TIMES Monday evening that he is “not aware” of the development.

The Special Adviser to the President on Media and Publicity, Ajuri Ngelale, did not answer or reply to calls and a text message sent to him on the topic.

But announcing a net profit of N3.297 trillion at the close of the financial year ending December 2023, the Chief Financial Officer of the NNPC Ltd, Umar Ajiya, claimed that the company was not paying subsidy on petrol, saying the company was only taking care of petrol importation shortfall between it and the federation.