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.
Former Vice President, Atiku Abubakar has criticized the federal government’s plan to secure an additional N1.7 trillion loan through Eurobonds to cover a shortfall in the 2024 budget, describing the borrowing as unsustainable and harmful to Nigeria’s economy.
In a statement shared on Thursday via his X (formerly Twitter) handle, Atiku accused the Bola Tinubu-led administration of burdening Nigerians with debt while failing to provide clear answers about the country’s fiscal challenges.
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He also faulted the National Assembly for enabling what he called a “voracious appetite” for loans.
The former Peoples Democratic Party (PDP) presidential candidate expressed alarm over a recent World Bank report ranking Nigeria as the third most indebted country to the International Development Association (IDA), calling the development troubling.
“The recent report released by the World Bank, showing Nigeria as the third most indebted country to the International Development Association (IDA), is very concerning,” Atiku stated.
He raised further concerns about the government’s decision to benchmark the proposed loan at an exchange rate of 1 USD to N800, despite the Central Bank of Nigeria’s official rate being over N1,600.
“What makes this particular loan proposal even more concerning is that it is benchmarked at the exchange rate of 1 USD to N800, whereas the current exchange rate from the Central Bank of Nigeria stands at over N1,600 to 1 USD,” he said.
Atiku questioned the need for additional borrowing, given the government’s earlier claims of record-high revenue collection.
“In July this year, Tinubu boasted that the FIRS and Customs under his watch had collected all-time high revenues to finance the budget. Why are they still borrowing?” he said
He accused the government of a lack of transparency, describing the borrowing spree as detrimental to Nigerians already struggling under economic hardship.
“There is something that they are not telling Nigerians, even as they are being crushed by a combination of their failed trial-and-error policies and loan rackets.”
Atiku also referenced a report by BudgIT, a budget monitoring group, which criticized the 2024 budget for its inefficiencies.
He alleged that corruption, rather than infrastructure or development needs, was driving the government’s borrowing decisions.
“These loans are powered by corruption and not for infrastructure and development needs. This voracious appetite for humongous loans is deeply concerning,” he said.
Reflecting on Nigeria’s financial history, Atiku lamented the return to significant foreign indebtedness just years after former President Olusegun Obasanjo’s administration cleared the country’s debt.
“It is agonizing to see that just a few years after the Obasanjo administration took us out of foreign indebtedness, we are today back at the top spot in the same conundrum,” he stated.
He called for a more cautious approach to borrowing, urging the government to prioritize fiscal responsibility and transparency to avoid worsening Nigeria’s economic challenges.
The International Criminal Court (ICC) has taken a historic step, issuing arrest warrants for Israeli Prime Minister Benjamin Netanyahu and former Defense Minister Yoav Gallant.
The charges include crimes against humanity and war crimes allegedly committed during Israel’s recent assault on Gaza.
In a detailed statement, the ICC accused the Israeli leaders of “intentionally and knowingly depriving the civilian population in Gaza of objects indispensable to their survival, including food, water, and medicine and medical supplies, as well as fuel and electricity.”
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The ICC’s move marks a significant escalation in international scrutiny of the Israeli-Palestinian conflict. Netanyahu and Gallant are alleged to have orchestrated policies that caused severe harm to the civilian population in Gaza, leading to widespread condemnation from human rights organizations.
Alongside the charges against Israeli officials, the ICC also issued an arrest warrant for Hamas military commander Mohammed Deif. Deif has long been a central figure in Hamas’s military operations. Israel’s military claims to have killed him in a July airstrike, although this has not been independently verified.
The warrants highlight growing calls for accountability amid the ongoing conflict in the region. The ICC’s actions are likely to provoke heated debate and may complicate diplomatic efforts aimed at resolving the crisis.
With the warrants issued, global attention now turns to how the international community will respond and whether any practical steps will be taken to enforce them.
Governor Monday Okpebholo of Edo State has inaugurated a 12-member committee tasked with recovering government vehicles reportedly in private hands.
The committee, led by Kelly Okungbowa, has been given a two-week mandate to retrieve the vehicles and ensure their return to the state government.
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Speaking during the inauguration ceremony in Benin City, Governor Okpebholo emphasized the importance of accountability in the management of public resources.
He urged the committee to carry out its assignment thoroughly and within the bounds of the law.
In his response, Okungbowa expressed gratitude to the governor for entrusting the team with the assignment, vowing to deliver results within the stipulated timeframe.
“A lot of vehicles used by the past administration are missing, as those in custody of the vehicles have refused to return them,” Okungbowa said.
“The governor deemed it fit to inaugurate us today with a mandate to recover all government vehicles in private hands.”
The committee, which includes representatives from Edo’s three senatorial districts, is set to investigate and recover the vehicles based on credible intelligence already at their disposal.
“We already have vital information regarding some persons still holding government vehicles,” Okungbowa stated. “We will do the job according to the law, and both the government and the people will be satisfied with the outcome.”
He also called on members of the public to assist the committee by providing information about any government vehicles that may still be in private possession.
“We want to appeal to members of the public who might be aware of anyone still keeping government vehicles in their houses to please inform us to enable the committee to recover such for the Edo State Government,” Okungbowa said.
The committee’s vice chairman, Rt. Hon. Victor Edoror, a former Speaker of the Edo State House of Assembly, will work alongside other members to ensure the success of the initiative. The public can reach the committee at 08110165121.
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