Fuel subsidy exceeds N1.03 trillion, and NNPC will deduct N199 billion from the federation account.
The Nigerian National Petroleum Company Limited has estimated that the amount spent on subsidizing Premium Motor Spirit, also known as petrol, between January and October 2021 will be N1.03 trillion NewsReport gathered.
The NNPC also stated that its October 2021 value shortfall of N199bn would be deducted from its November 2021 proceeds to be shared at the December 2021 Federation Accounts Allocation Committee meeting.
The oil company revealed this in its most recent report, which included a presentation made to the FAAC meeting in November 2021 and was obtained by our correspondent in Abuja on Sunday.
The presentation was also for the NNPC’s September 2021 crude oil and gas sales and proceeds received in October 2021.
In the report, the oil firm referred to its subsidy spending as under-recovery, as it had repeatedly stated that it had no authorization by the National Assembly to pay subsidy.
For about four years running, the NNPC has remained the sole importer of petrol into Nigeria. Other marketers stopped importing the commodity due to their inability to adequately access the United States dollar.
A study of the latest report by the NNPC showed that while nothing was recorded as under-recovery of the PMS/value shortfall in January this year, the oil company spent N25.374bn, N60.396bn, and N61.966bn in February, March and April respectively.
The oil firm further posted petrol subsidy spending/value shortfalls of N173.132bn, N149.283bn, and N163.709bn in August, September and October respectively.
In its notes to the November 2021 FAAC, the national oil company stated that its overall crude oil lifting of 11.49 million barrels (export and domestic crude) in September 2021 recorded a 98.5 per cent increase relative to the 5.79 barrels lifted in August 2021.
“Nigeria recorded 1.417 million productions in September 2021,” the firm stated in its latest report.
On sales receipt, the NNPC stated that there was no crude oil export revenue for the month of September.
It, however, stated that domestic gas and other receipts in the month were N6.78bn.
It stated that the domestic gas receipt in the month was N4.07bn, adding that feedstock valued at $59.43m was sold to Nigeria Liquefied Natural Gas company during the period, out of which $52.57m was received during the month.
For other receipts, the oil firm stated that the sum of $95.63m being miscellaneous receipts, gas and ullage fees and interest income was received in October 2021.
“The sum of N252,968,629,898.13 was the gross domestic crude oil and gas revenue for the month of October 2021,” the report stated.
It added, “The recoveries were strategic holding cost and pipeline repairs amounting to N7,757,631,778.84; product losses worth N143,386,571.87 and value shortfall of N163,709,314,928.61 (this comprised of the N123,709,314,928.61 for September 2021 and N40,000,000,000 value shortfall deferred in June 2021.
“The October 2021 value shortfall of N199,007,758,422.75 is to be recovered from the November 2021 proceeds due for sharing at the December 2021 FAAC meeting.”
The deductions by the NNPC from its remittances to FAAC had raised diverse concerns lately, particularly among state governors.
The Governor of Kaduna State, Nasir El-Rufai, for instance, recently decried the high cost of fuel subsidy, which according to him, was not reasonable.
He stated that the Nigerian Governors’ Forum had met and agreed to back the Federal Government’s transport palliative scheme as well as halt the petrol subsidy regime.
El-Rufai had said, “This is why the Nigerian Governors’ Forum met and agreed to support the Federal Government’s social compact. Withdraw this subsidy by February.
“Use the N250bn per month that would have been lost between February and May to do this conditional cash transfer that would put money in the pockets of Nigerians and alleviate not only the cost of transportation but the two to three percent job inflation that is expected when the subsidy is eliminated. We cannot sustain it. We cannot continue with it.
“I don’t want to predict what will happen when 35 out of 36 states cannot pay salaries of civil servants, or even have any money to run the government. We will not have enough money to pay salaries. Already, some states are building up arrears, even oil-producing states are struggling to pay salaries.”
However, operators in the downstream oil sector, as well as economic experts, stated that while it was okay to remove the petrol subsidy, the government must be cautious in its withdrawal.
The National Public Relations Officer of the Independent Petroleum Marketers Association of Nigeria, Chief Ukadike Chinedu, told our correspondent that subsidy withdrawal was nice but might increase hardship when implemented.
He said, “The Federal Government is talking about removing subsidy but not talking about the adverse effects of the removal of subsidy. It will affect other commodities, the standard of living among the majority of citizens will be worse.
“And this is because if PMS rises to N365/liter, local transportation will be going for over N1,000 or thereabout and the standard of living and the cost of goods in the market will skyrocket. This will cause heavy inflation. So the NNPC has to look at the adverse effects of this move to remove subsidy.”
A renowned economist and Chief Executive Officer, Centre for the Promotion of Private Enterprise, Dr. Muda Yusuf, told our correspondent that his position on subsidy had been that the government must be tactical in handling the matter.
Referring to his earlier statement, he described subsidy removal as a tricky issue that could pose a serious challenge to the government if not tactically managed.
“The reality is that the sentiments among the citizenry are not favorable to the deregulation of petroleum product pricing or petroleum subsidy removal. Even some elites are curiously not persuaded on the justification for the subsidy removal,” he stated.