President Bola Tinubu has granted approval for the Nigeria National Petroleum Company Limited (NNPCL) to use the 2023 dividends intended for the federation account to cover petrol subsidy payments. This decision marks a significant shift from the initial plan, as these dividends were originally meant to be distributed among the three tiers of government.
This development comes in the context of the federal government’s denial of the existence of petrol subsidies, despite President Tinubu’s declaration on his inauguration day, May 29, 2023, that “subsidy is gone.”
Minister of Finance Wale Edun previously indicated that the disparity between the landing cost of petrol and its selling price at filling stations is being covered by an unspecified entity, rather than a formal subsidy scheme.
According to The Cable, President Tinubu has also approved the suspension of 2024 interim dividends payments to the federation to improve NNPC’s cash flow. The NNPC has informed the president that it will be unable to remit taxes and royalties to the federation account due to the subsidy payments, which it categorizes as subsidy shortfall and FX differential.
The NNPC’s forecast suggests that the cumulative cost of petrol subsidies from August 2023 through December 2024 will amount to ₦6.884 trillion. This shortfall will prevent the company from paying ₦3.987 trillion in taxes and royalties to the federation account.
As part of the adjustments, NNPC is expected to pause the payment of interim dividends from May to December 2024.