The Nigerian National Petroleum Company Limited (NNPCL) has demanded a refund of N4.71tn from the Federal Government to settle outstanding debts to import Premium Motor Spirit(PMS), also known as petrol, into the country.
The claim was listed as “Exchange rate differential on PMS and other joint venture taxes” on petrol products imported by the company between August 2023 to June 2024.
Punch reports that this was disclosed by the Minister of Finance and the Coordinating Minister of the Economy, Wale Edun, at the June meeting of the Federation Accounts Allocation Committee.
Exchange rate differentials refer to the income accrued to banks or government agencies from the difference in value between two currencies at different times through foreign exchange’s sale and purchase prices.
For example, if you exchange one United States dollar for 0.9 euros today, and tomorrow you get $1 for 0.8 euros, the exchange rate differential is the change between these two rates.
This development also means that the government will support fuel imports by covering the difference between the projected rate and the actual expenses incurred by the NNPC for importing petroleum products into the country.
This difference in cost, which ordinarily should be reflected in the retail price of the product and borne by final consumers, contradicts the government’s claims that subsidies have been eliminated.
This revelation also comes amid challenges faced by the petroleum company to ensure the adequate supply of PMS to marketers for distribution nationwide.
Speaking at the meeting, the minister explained to the state commissioners of finance that the national oil company received presidential approval to carry out this duty using the “Weighted Average Rate” from October 2023 to March 2024.
Edun added that the company had also sought an extension of the period to cover the differential rate but was advised to write to the National Economic Council requesting approval.
The minutes read, “NNPC Limited Exchange Rate Differentials on PMS Importation and Other Joint Venture Taxes for the period August 2023 to April 2024.
“The chairman, PMSC (Post Mortem Sub-Committee) reported that NNPC Limited informed the sub-committee that it had an outstanding claim of N2,689,898,039,105.53 against the federation as a result of the use of ‘Weighted Average Rate’ as of May 2024.
“Furthermore, he disclosed that the sub-committee was able to establish that there was Presidential approval to use the ‘Weighted Average Rate’ from October 2023 to March 2024.”
It was gathered that the government through the National Economic Council had granted the NNPC permission to import fuel at an exchange rate of N650 to $1 at retail coastal pump prices from June 2023 but the devaluation of the naira surged the price to N1,200, indicating a difference of N550 as exchange difference.
