In the wake of the announcement by Nigerian President Bola Tinubu, that “there is no more fuel subsidy”, the Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPCL), Mele Kyari, has disclosed that the federal government is owing the company N2.8 trillion in fuel subsidy arrears.
Kyari made this known on Tuesday amid the fuel scarcity prompted by the president’s announcement. The chief executive told State House correspondents after a meeting with Tinubu at the Presidential Villa, Abuja, that the fuel subsidy regime is no longer sustainable.
Tinubu had in his inaugural address shortly after taking the oath of office at Eagle Square, Abuja, on Monday announced the end of the fuel subsidy, citing lack of funds to sustain the payments.
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According to the president, subsidy payments are not factored in the budget left behind by former President Muhammadu Buhari’s administration.
Kyari, who had in February, lamented that the NNPCL’s cash flow was being severely impacted by over N400 billion it’s paying monthly to subsidize Premium Motor Spirit, supported the president’s announcement. He said given current economic realities of the country, making subsidy payment is no longer tenable.
“Today, we are waiting for them (federal government) to settle up to N2.8 trillion of NNPC’s cash flow from the subsidy regime and we can’t continue to build this.
“Since the provision of the N6 trillion in 2022, and N3.7 trillion in 2023, we have not have not received any payment whatsoever from the federation account.
“That means the federal government was unable to pay and we have continued to support this subsidy from the cash flow of the NNPC. That is when we net off our fiscal obligations of taxes and royalties.
“There’s still a balance that we are funding from our cash flow. And that has become very, very difficult and affecting our other operations.
“We are not able to keep some of this cash for investment in our core businesses. And the end result is that it can be a huge challenge for the company and we have highlighted this severally to the government that they must compensate the NNPC by paying the money that we have spent on the subsidy.
“So today, the country does not have the money to pay for the subsidy. There is an incremental value that will come from it. But it is not an issue of whether you can do it or not because today we can’t afford it and they are not able to pay our bills. That comes to how the federation owes NNPC now,” he said.
The fuel subsidy regime was scheduled to end by June, according to the provisions of the Petroleum Industry Act (PIA), but the preceding administration had bequeathed the implementation to its successor.
Tinubu said the fuel subsidy regime will be ending soon and the funds will be channeled to development schemes that will benefit Nigerians.
Containing the exigencies
Fuel prices went up as queues returned to filling stations across the country, following the announcement that the subsidy will be removed. Many filling stations have shut down operation while those open sell fuel for as much as N600 per liter.
With no provision from the government to cushion the effect of the subsidy removal on poor Nigerians, the economic impact is expected to be severe. Buhari’s attempt to borrow from the World Bank, $800 million that will be disbursed to poor households across the country as palliative, failed.
Against this backdrop, transport fares and the cost of goods and services are expected to go up across the country in the coming weeks. Nigerians are largely counting on the newly-launched Dangote Refinery to reduce the cost of PMS.
However, the Nigeria’s Independent Petroleum Marketers Association of Nigeria (IPMAN), has warned that while the launch of the Dangote Refinery would address Nigeria’s fuel import and scarcity issues, it will lead to initial increase in pump price, though it will decrease in the long run.
Products from the 650,000 bpd refinery are expected to hit the market by the end of July, a month after the subsidy payment might have ended.