NEWS
Tinubu Approves NNPC’s Plan To Spend Federation Dividends On Petrol Subsidy
President Bola Tinubu has approved a measure allowing the Nigerian National Petroleum Company (NNPC) Ltd to allocate the 2023 final dividends due to the federation to cover petrol subsidy expenses.
To bolster NNPC’s cash flow, the president has also sanctioned the suspension of 2024 interim dividend payments.
Additionally, NNPC has notified the president of its inability to remit taxes and royalties to the federation account due to the financial strain caused by the subsidy payments, which it has termed “subsidy shortfall/FX differential.”
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Forecasts from NNPC suggest that the cumulative petrol subsidy bill, which started in August 2023, could reach N6.884 trillion by December 2024. This would result in a deficit of N3.987 trillion in taxes and royalties owed to the federation account.
The total amount of dividends to be withheld or suspended has not been disclosed. NNPC plans to pause interim dividend payments from May to December this year.
Interim dividends, based on monthly inflow projections, are typically shared among the three tiers of government, while final dividends are settled at year-end following reconciliation.
Under the Petroleum Industry Act (PIA), NNPC is required to remit taxes, royalties, and dividends to the federation, its sole shareholder.
However, in June 2024, NNPC alerted President Bola Tinubu that its cash flow was under severe pressure due to the burden of subsidy payments, which threatened the company’s financial stability.
NNPC expressed concerns that it might be unable to sustain petrol imports as the rising subsidy costs, driven by “forex pressure,” continued to escalate.
TheCable reports that Mele Kyari, NNPC’s Group CEO, informed the president that the removal of the subsidy in June 2023 resulted in monthly savings of N400 billion for the federation.
This enabled NNPC to deposit N2.032 trillion in taxes and royalties into a secured account at the Central Bank of Nigeria (CBN) by January 2024.
Kyari explained that the situation worsened following the naira’s devaluation, leading to a continuous rise in the NAFEX exchange rate.
By August 2023, NNPC’s fuel importation costs had shifted from surplus to deficit, resulting in a subsidy bill of N52.73 billion.
This figure rose to N57.59 billion in September, N212.28 billion in October, and surged to N665.60 billion in November as the exchange rate more than doubled from when the subsidy was initially removed.
The subsidy bill slightly decreased to N537.66 billion in December but spiked again to N693.67 billion by January 2024.
In February, the bill dropped to N592.09 billion and further declined to N497.39 billion in March.
However, it surged once more to N833.68 billion in April, prompting Kyari to issue an urgent appeal to the president.
He stated that the mounting costs have placed “undue pressure” on NNPC, preventing it from remitting taxes and royalties to the federation account.
Kyari also warned that the country’s energy security is at risk, as NNPC may struggle to maintain petrol imports “beyond July 2024.”
In presenting his case to the president, Kyari highlighted that NNPC had implemented various strategies between August 2023 and April 2024, but the situation remained dire.
The measures included enhancing oil production by tackling theft and vandalism, rescheduling debts and initiating forward sales, deferring payments to suppliers and contractors, postponing non-essential projects, and intensifying debt recovery efforts.
Despite these interventions, projections indicated a worsening cash flow deficit driven primarily by the exchange rate fluctuations.
According to NNPC, while an estimated N3.987 trillion in taxes and royalties is expected to be owed to the federation account by December 2024, the company would still face an outstanding N2.897 trillion after reconciling its obligations and subsidy shortfalls.
Kyari urged President Tinubu to approve the use of the 2023 final dividends due to the federation and to delay the 2024 interim dividends to offset the subsidy costs.
It was understood that Tinubu granted Kyari’s request on June 6, 2024.
Recall that in August 2023, when President Tinubu was considering reintroducing the petrol subsidy, his spokesman, Ajuri Ngelale, promptly denied the claim, insisting there was no reversal on the new policy.
However, internal communications between NNPC and the president now frequently reference the term “subsidy.”
It is believed that the All Progressives Congress (APC) government prefers to avoid the term due to its historical use as a key argument against the Peoples Democratic Party (PDP) during the 2015 election campaign, when the “subsidy scam” narrative helped dislodge the PDP from power.
During the Muhammadu Buhari administration, the term “under recovery” was used as a substitute for “subsidy,” although the word “subsidy” eventually reappeared in official discourse later on.
The Tinubu administration’s official stance is that “subsidy is gone.” Despite this, NNPC projects that over N5 trillion will be spent on subsidy payments this year alone.
When the subsidy was initially removed in June 2023, the exchange rate stood at N463/$, but it has since surged to approximately N1,500/$. Combined with high crude oil prices, this has created a “double whammy” for NNPC in managing fuel import costs.
NNPC utilizes a “derived FX rate” to keep petrol prices between N600 and N700 per litre. The gap between this derived rate and the official exchange rate represents the subsidy or FX differential.
The Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) has raised concerns over alleged monopolistic practices by Dangote Refinery, following a public dispute about fuel pricing in the downstream petroleum sector.
Recall that the refinery, Africa’s largest, recently disclosed its petrol pricing at N990 per litre in trucks and N960 per litre into ships, a move it justifies as being in line with international rates.
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PETROAN, however, sees this as an attempt to suppress competitors and dominate the Nigerian market.
The rift began when Dangote Refinery claimed that complaints from marketers regarding its pricing were fueled by intentions to import cheaper, potentially substandard products.
In response, PETROAN strongly rejected these allegations, suggesting that Dangote’s claims are tactics designed to maintain a monopoly in the sector.
Joseph Obele, PETROAN’s spokesperson, stated that the association remains committed to importing high-quality products at more competitive rates to ensure affordability for Nigerian consumers.
According to PETROAN, competition in the market is essential for achieving fair pricing, and any attempt to stifle it would be detrimental to consumers.
They argue that Dangote Refinery’s pricing should reflect production costs and fair margins rather than international benchmarks, especially given concessions granted by the government for the refinery’s establishment.
PETROAN also announced its plans to partner with foreign refineries and financial backers to import premium-quality petroleum products at prices below current rates.
The association aims to enter the market by December 2024, pending necessary regulatory approvals.
“The allegations that PETROAN will import substandard products are unfounded and aimed at creating an unfair playing field,” the statement read.
PETROAN warned that similar claims in the past had led to significant price hikes when competitors were pushed out, emphasizing that the entry of new players into the market would lead to more competitive pricing and ultimately benefit Nigerian consumers.
PETROAN expressed appreciation for President Bola Tinubu’s commitment to revitalizing Nigeria’s state-owned refineries and urged the government to consider privatizing the Port Harcourt and Warri refineries once rehabilitation is complete.
The association believes a transparent privatization process will help strengthen Nigeria’s downstream sector and counter monopolistic tendencies.
To address the ongoing pricing challenges in the sector, PETROAN called on the government to convene a comprehensive meeting of industry stakeholders, including major associations like IPMAN, DAPPMAN, MEMAN, NUPENG, and PENGASSAN.
PETROAN believes that collaboration among these groups will be instrumental in establishing a sustainable and competitive pricing framework for petroleum products in Nigeria.
Sultan of Sokoto, Sa’ad Mohammad Abubakar II, has called on Nigerians to avoid publicly criticizing their leaders, instead urging citizens to place their trust in God to address leadership concerns as He deems fit.
Speaking at the Regional Conference on Climate Change-Induced Conflicts in Northern Nigeria, organized by the Kaduna State Bureau of Interfaith in collaboration with International Alert, the Sultan emphasized faith and patience in navigating the country’s challenges.
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Acknowledging Nigeria’s current economic and social hardships, the Sultan encouraged continuous prayer, not only for the nation but for its leaders as well.
“Even though many feel times are particularly hard, we believe relief will come. Let’s increase our prayers for our leaders, trusting God to address them in His way,” he said, expressing hope that divine intervention could bring stability and prosperity.
The Sultan reminded political leaders of their ultimate accountability to God, cautioning that they will stand alone on the Day of Resurrection, with only their deeds to support them.
“On that day, every leader will stand alone. Governors, advisers—none will have support except their own deeds. Let us act with a deep sense of responsibility and fear of God,” he stated.
Addressing religious leaders, he warned against misleading their followers for personal gain, underscoring the trust many place in their religious guidance.
“Only God can save any human being,” he said, encouraging Nigerians to remain faithful and discerning in their spiritual beliefs. “Focus on worshiping Allah and leave the rest to Him. Don’t follow those who might lead you astray.”
With leaders from various religious communities, including the President of the Christian Association of Nigeria (CAN), in attendance, the Sultan called for unity, resilience, and communal effort to tackle pressing issues such as climate change, poverty, and insecurity in the northern region.
He praised the North’s history of unity and resilience, warning against divisive narratives that threaten communal harmony. “When we are united, we can face any challenge and build a prosperous community,” he asserted.
The Sultan’s remarks come amid ongoing social and environmental issues in the region, including a recent surge in climate-related challenges that have exacerbated poverty and security threats.
In light of these issues, he called on both Muslims and Christians to intensify their prayers, saying, “Our country faces many challenges, and we must turn to God in prayer. Let us intensify prayers in our mosques and churches.”
In a decisive move, President Bola Tinubu has ordered the immediate release of all minors detained by police during the recent #EndBadGovernance protests.
The directive, announced by Minister of Information and National Orientation, Mohammed Idris on Monday, underscores the government’s commitment to protecting children’s rights and ensuring justice.
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Idris confirmed that President Tinubu’s directive prioritizes the welfare of detained minors, instructing the Ministry of Humanitarian Affairs to facilitate their safe reunification with their families.
A committee led by the Ministry of Humanitarian Affairs will be established to oversee the welfare of the released minors and ensure compliance with the president’s orders.
Additionally, President Tinubu has directed a formal investigation into the actions of law enforcement agencies involved in the arrests.
The president emphasized that any misconduct uncovered during the investigation will result in disciplinary action, affirming his administration’s dedication to accountability within law enforcement.
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