The Nigerian National Petroleum Company Limited (NNPCL) deducted a whooping N3.302 trillion on petrol subsidy from oil and gas revenue which it was expected to remit to the Federation Account between January and November 2022. The deductions include N152,852,247,197.02 which translated to PMS value shortfall recovery/subsidy for November 2022
This was revealed in the Federation Account Allocation Committee (FAAC) Post-Mortem Sub-Committee (PMSC) signed by Kabir Mashi, sub-Committee Chairman presented to FAAC on Tuesday.
According to FAAC’s Post-Mortem Sub-Committee the cumulative deduction made by NNPCL between January and November 2022 was N3,302,465,705,596.30, without making any contribution to the FAAC in the eleven months.
The whole deduction without remittance by the NNPCL to FAAC Last year, on subsidy claims has significantly reduced the amount shared by the local government, states, Federal Government last year.
EnergyDay’s breakdown of the subsidy claims by NNPC in 2022, showed that in subsidy payment for January, February, March, April, May, and June were N210.38 bn, N219.78 bn, N245.77 bn, N271 bn, N327.07 bn, and N319.18 bn, respectively.
Other subsidy deductions for subsequent months including July, August and September, and October, were N448.782 bn, N525.714 bn, N341.937 bn, N239.411 bn, and N152.852bn respectively.
Subsidy deductions has been a major drain on the Nigeria’s resources with very tough fiscal pressure on the country, as the government claimed that it still borrows to import petroleum products into the country.
The federal government had projected to spend N4 trillion on petrol subsidies in 2022, with plan to also spend N3.36trillion for fuel subsidy between January and June 2023. There are speculations that the government may likely spend a whooping N6.7 trillion on petrol subsidy for the whole 2023, if it is not removed in June,2023.
The FAAC Committee also accused the NNPCL of using an exchange rate lower than the Central Bank of Nigeria (CBN) official rate for the sales of domestic crude oil between 2015 and 2022.
The FAAC sub-committee said it observed some underpayments of N185,458,842,270.76 to the federation account on Domestic Crude sale for the period 2015 to 2022, as a result of the low exchange rate applied by the NNPC, which is below the CBN’s official rate.
The Committee claimed that the Central Bank of Nigeria (CBN) has confirmed that NNPC did not use the rate advised by the CBN while NNPC has not yet responded to the matter after several months of being given the analysis to review.
According to the claim by the PMSC, despite the concerns of the Federal Inland Revenue Service (FIRS), Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and other stakeholders, NNPC Limited has continued to use a different Exchange Rate in remittances to the Federation Account till date.
The Committee however charged the FAAC plenary to recommend the appropriate exchange rate to be used by NNPC Limited on remittances to the Federation Account to avoid under payments to the Federation Account. It also suggested the appointment of a third-party forensic auditor to validate the established underpayments to the Federation Account by NNPC.
The FAAC Committe also accused NNPCL over its failure to reveal the locations of its Priority Projects inherited when it transformed into a corporate entity.
According to the Committee, the NNPCL refused to disclose the locations of the Government Priority Projects to enable the Sub-Committee to visit and assess the level of work done in view of the deductions from the Federation Account.
“Following the implementation of the Petroleum Industry Act, 2021 which transferred Joint Venture (JV) assets in the oil and gas Sector to NNPC Limited with the exception of Production Sharing Contract assets, the Priority Projects are owned by NNPC Limited”.
Between January 1999 and July 2022, the NNPC is said to have deducted N1,096,867,042,733.94 for government priority Projects, an amount, which should have gone into the Federation Account.
EnergyDay however gathered that beside the subsidy claims by the NNPCL, the Corporation also claimed deduction on pipeline operations, repairs and management, strategic holding cost, and government priority projects.