President Bola Tinubu has given approval to the Nigerian National Petroleum Company (NNPC) Limited to use the 2023 final dividends owed to the federation to cover the cost of petrol subsidies
Although Tinubu announced the removal of fuel subsidy during his inaugural address on May 29, 2023, there have been strong indications that government still spends billions on subsidy.
The president sanctioned the suspension of 2024 interim dividends to support NNPC’s cash flow, as the national oil company struggles with the financial burden of the petrol subsidy.
“The NNPC explained that the removal of the petrol subsidy in June 2023 initially led to monthly savings of N400 billion for the federation, enabling the company to remit N2.032 trillion in taxes and royalties by January 2024. However, the devaluation of the naira led to a significant increase in the NAFEX exchange rate, which, in turn, caused the subsidy bill to escalate. The NNPC’s costs for fuel importation turned negative in August 2023 and continued to rise, reaching N833.68 billion by April 2024. This financial strain forced NNPC to seek President Tinubu’s approval to use the 2023 dividends to cover the subsidy costs” AriseTV stated.
After various discussions with oil companies and NNPC “President Tinubu directed the company to use the taxes, royalties, and other funds that are supposed to be remitted to the Federation Account to defray the fuel subsidy cost,” the report said. This will help to keep petrol prices within the N600-N700 per litre range, with the gap between this rate and the official exchange rate constituting the subsidy/FX differential.
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According to TheCable, NNPC is expected to pause the payment of interim dividends for eight months this year from May to December.
Interim dividends based on inflow projections are usually remitted monthly into the federation account and shared by the three tiers of government while the final dividends are paid at the end of the year after reconciliation.
A forecast from NNPCL, obtained by the newspaper, indicated that the total petrol subsidy expenses from August 2023 to December 2024 will amount to N6.884 trillion, leaving the company unable to remit N3.987 trillion in taxes and royalties to the federation account.
The exact amount of dividends that would be withheld or put on hold could not be verified.
