The Federal Government’s indebtedness to the Nigerian National Petroleum Company Limited as exchange rate differential (subsidy) for the importation of Premium Motor Spirit (petrol) rose to N7.74tn as of September 2024 when the deregulation of the downstream oil sector was fully implemented.
This amount covers the cost of maintaining a specific price range in the retail market, despite acquiring the product at a higher rate between June 2023 and September 2024.
This was disclosed in a presentation by the national oil company to the Federation Account Allocation Committee at its February meeting in Abuja. Our correspondent obtained a copy of the document on Monday.
The FAAC document also revealed that the government is working out measures to settle the N7.74tn fuel subsidy debt within a period of 210 days.
In August, The PUNCH exclusively reported that the NNPCL demanded a refund of N4.71tn from the government to settle outstanding debts used to import petrol.
The claim, at the time, was listed as “Exchange rate differential on PMS and other joint venture taxes” on products imported by the company between August 2023 to June 2024.
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 $1 for N1,600 today, and tomorrow you get $1 for N1,500, the exchange rate differential is the change between these two rates.
The government supported fuel imports by covering the difference between the projected rate and the actual expenses incurred by the NNPCL 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, is the amount the national oil firm now seeks to recover from the government.
An analysis of the document explained that the exchange rate differential for the period of July to September 2024 was estimated based on the Nigerian Autonomous Foreign Exchange Market rate.
“Thus, the actual differentials may change in line with the prevailing forex (foreign exchange) rate at the time of import settlements.”
The balance brought forward is the additional claim due to the actualisation of an estimated portion of 2017 to May 2023 PMS under-recovery.
A breakdown showed that the total sum of the exchange rate differential due was N10.499tn, but N2.756tn was the exchange rate differential recovered between November 2023 and September 2024. This reduced the cumulative outstanding amount to N7.74tn.
The document further remarked that the weighted average of purchased USD as of February 7, 2025, was applied. It added that payment is ongoing within 210 days.
A month-by-month breakdown indicated that the debt with an outstanding balance of N1.29tn increased to N1.402tn in June 2023, N1.48tn in July 2023, N1.535tn in August, N1.59tn in September, and N1.81tn in October 2023.
By November, these claims increased by N662.9bn to N2.378tn, and by another N616.38bn to N2.94tn in December 2023.
The document further indicated that the figure increased to N3.57tn in January 2024, N3.96tn in February, N4.68tn in March, N5.81tn in April, N6.47tn in May, and N6.97tn as of June 2024.
In July 2024, it increased to N7.46tn, N7.66tn in August, and N7.74tn in September 2024. The amount represents 14.07 per cent of the N54.99tn 2025 national budget.
On May 29, 2023, during his inauguration, President Bola Tinubu publicly declared that “subsidy is gone,” signalling the end of barriers that had been restricting the nation’s economic growth.
The International Monetary Fund, the World Bank, and other authoritative figures had argued that the government quietly reintroduced fuel subsidies.
In June, a proposed economic stabilisation plan document stated that the government planned to spend about N5.4tn on fuel subsidies.
Reacting in an earlier interview with The Punch, an energy expert, Wumi Iledare, questioned why the national oil firm was asking the government to cover its differentials when NNPCL sold oil in foreign currency on the government’s behalf.
According to him, the NNPCL was supposed to pay royalties to the government like other oil companies.
“If you look at the taxes paid by the international oil companies, they are tax oil which NNPCL sells on behalf of the government and gives the government the dollar. So, it is very difficult for me to understand why the Federal Government has to return any money to NNPCL.
“Unless NNPCL is saying that it is the one funding the government in dollar equivalent, and since the government is changing the exchange rate to the tune of N1,500, the government cannot keep the windfall profit because the government now has more than when the exchange rate was N700,” Iledare stated.
The scholar added, “It is very difficult for me to comprehend the rationale because the government is the owner of the equity, the government owns the tax oil, and the government is the owner of the royalty oil that the NNPCL is selling on its behalf.
“If the argument is about what they call under-recovery, that means NNPCL spent dollars on behalf of the government to import fuel, and the government is giving them the under-recovery in naira, which I am not sure of. It is very complicated to understand. By the way, the Federal Government is not necessarily the owner of NNPCL. It is the federation that is the owner of the NNPCL.”
Meanwhile, members of the FAAC committee have lamented the inconsistency in revenue reporting by the NNPCL. The Ogun State Accountant-General, Tunde Aregbesola, made the complaint due to a reduction in revenue compared to the amount remitted in November.
The minute read, “AG Ogun observed that there was a significant decline in revenue compared to November 2024 in-flow, and upon reviewing the financial records, particularly note 7, it was noted that the receivables from NNPCL amounted to approximately N10.8tn.
“However, there are concerns about the accuracy of the figures as reports suggest that NNPCL may still be reconciling the figures.”
He further stated that if the receivables were confirmed and added, they would represent a substantial part of the over N10tn, which could drastically affect the overall financial outlook.
In response, the Chairman, Oluwatoyin Madein, stated that the matter concerned the NNPCL and NUPRC, and the reconciliation by the Alignment Committee was in the process of handling it.
She emphasised the importance of noting all relevant issues during the reconciliation to ensure they are properly addressed.
She added that a member questioned the duration of the reconciliation process in the Stakeholders Alignment Committee and sought to know whether a timeline could be set for its conclusion.
