According to reports, it has been estimated that the Federal Government currently bears the heaviest burden of indebtedness to the national oil company, amounting to a substantial sum of N4.1 trillion ($9.74bn), specifically allocated for subsidy payment. This assertion is being made despite the claims by the Nigeria Extractive Industries Transparency Initiative (NEITI), which contends that the now-defunct Nigeria National Petroleum Corporation (NNPC) failed to transfer the sum of $1.9 billion to the Federation Account Allocation Committee (FAAC) in the year 2021, prior to its transformation into a commercial enterprise.
It is worth remembering that the corporation transformed into NNPC Limited on the 19th of July, 2022, as a commercial establishment, subject to the Companies and Allied Matters Act (CAMA). On the auspicious occasion of May 29, President Bola Tinubu made the decision to eliminate the subsidy on petrol, owing to the Federal Government’s incapacity to sustain the weighty financial burden. Prior to then, the NNPCL held exclusive authority over the importation of petrol within the nation, expending approximately N400 billion on a monthly basis on behalf of the federation through a system commonly referred to as under-recovery.
President Tinubu established an inter-agency commission.
Fuel under-recovery cost N1.828 trillion from January to May of the year 2023, a 55 percent increase from the N1.27 trillion incurred in the similar period of 2022. According to sources close to the Presidency, despite NNPCL receiving multiple letters from FAAC demanding payment of approximately N2.8 trillion allegedly owed the federation accounts, it said it would not pay until the Federal Government reconciled its debt to the company, which stood at about N4.1 trillion.
One of the sources claimed that since the federation owes NNPC about N4.1 trillion and NNPC owes the Federal Government about N2.8 trillion, the federation should really write a cheque to NNPC Limited for the debt of N1.3 trillion it owes NNPC Limited. To settle the dispute that has been going on between NNPC Limited and FAAC for the past few years, President Bola Tinubu established an inter-agency commission. The national oil firm said that the situation needed to be settled for good after the Presidency claimed that special interests had misled the incoming president with false information.
Management of the corporation requested for investigation.
Since the President assumed position, entrenched interests have told him that NNPC Limited has refused to make payments into the federation’s coffers. To shed some light, the management of the corporation wrote to the President requesting an investigation into the situation, and according to the source, the President has kindly allowed the formation of an inter-agency team to look into the situation and reach a resolution. The Federation Account Allocation Committee (FAAC) had previously claimed that the corporation had short changed it by withholding N2.8 trillion in proceeds from crude sales, royalties, and taxes.
On the other hand, the corporation maintained that it was owed more than N4.1 trillion by the Federal Government in subsidies, electricity debt, and other miscellaneous costs. The committee, which has been meeting since June at the Ministry of Finance, has been tasked with settling disputes over the N2.8 trillion that NNPCL is believed to have failed to submit to the federation account and the N1 trillion that the Federal Government is allegedly indebted to NNPCL. The Nigerian Upstream Regulatory Commission (NUPRC) and the Federal Inland Revenue Service (FIRS) are also part of the debt reconciliation committee alongside the Ministry of Finance and NNPCL.
This action was taken to end the back-and-forth issue.
Others included are the Post-Mortem Sub-Committee of the FAAC, the Office of the Accountant General of the Federation (OAGF). The President appointed the committee after receiving a memorandum from Mallam Mele Kyari, GECO of NNPC, dated June 13, 2023, appealing with him to take action. According to the letter, this action was taken to finally end the back-and-forth between FAAC and NNPCL over the debts and payments as indicated by both parties. A preliminary report from the committee has apparently been sent to the President.