According to reports, President Bola Ahmed Tinubu has authorised the Nigerian National Petroleum Company (NNPC) Limited to spend the last dividends that are due to the federation in 2023 to pay for fuel subsidies.
According to BusinessDay, the president decided to stop the federation from receiving interim dividends in 2024 in order to improve NNPC’s cash flow. As per the report, the NNPC notified the president about a “subsidy shortfall/FX differential” stating that it is presently incapable of paying taxes and royalties into the federation account because of the subsidy payments.
Based on an estimate from NNPC that the newspaper was able to obtain, the research showed that the entire cost of petrol subsidies from August 2023 to December 2024 will come to N6.884 trillion, leaving the company the company unable to remit N3.987 trillion in taxes and royalties to the federation.
The company had previously warned President Tinubu in June 2024 that the subsidy payments were severely impacting its cash flow, making it difficult to sustain petrol imports due to “forex pressure.”
In June 2024, the corporation had alerted President Tinubu about the negative effects of the subsidy payments on its financial flow, which made it unable to continue importing petrol because of “forex pressure.”
According to the NNPC, the federation first saved N400 billion a month when the petrol subsidy was removed in June 2023. This allowed the firm to pay N2.032 trillion in taxes and royalties by January 2024. But the naira’s depreciation resulted in a sharp rise in the NAFEX exchange rate, which raised the cost of the subsidy.
In August 2023, the NNPC’s petroleum import expenses went negative. They grew further, reaching N833.68 billion by April 2024. Due to its financial difficulties, NNPC had to ask President Tinubu for permission to use the dividends from 2023 to pay for the subsidies.