President Bola Tinubu has authorized the Nigerian National Petroleum Company (NNPC) Ltd to apply the 2023 final dividends owed to the federation towards covering the cost of petrol subsidies.
The president also approved the suspension of the 2024 interim dividends, allowing NNPC to bolster its cash flow amidst escalating financial pressures.
The NNPC informed the president that it would be unable to remit taxes and royalties to the federation account due to these subsidy payments, which it termed “subsidy shortfall/FX differential.”
NNPC’s financial forecast reveals that the cumulative petrol subsidy bill from August 2023 to December 2024 will reach N6.884 trillion, leaving the company unable to remit N3.987 trillion in taxes and royalties to the federation.
The company had previously warned President Tinubu in June 2024 that the subsidy payments were severely impacting its cash flow, making it difficult to sustain petrol imports due to “forex pressure.”
The NNPC explained that the removal of the petrol subsidy in June 2023 initially led to monthly savings of N400 billion for the federation, enabling the company to remit N2.032 trillion in taxes and royalties by January 2024.
However, the devaluation of the naira led to a significant increase in the NAFEX exchange rate, which, in turn, caused the subsidy bill to escalate.
The NNPC’s costs for fuel importation turned negative in August 2023 and continued to rise, reaching N833.68 billion by April 2024. This financial strain forced NNPC to seek President Tinubu’s approval to use the 2023 dividends to cover the subsidy costs.