Tinubu Approves NNPC to Fund Subsidies with Dividends as Fuel Scarcity Persist
President Bola Tinubu has given the Nigerian National Petroleum Company (NNPC) the go-ahead to divert its 2023 dividend payments to the federal government towards funding fuel subsidies, according to reports by The Cable.
This decision comes as the country struggles with widespread petrol scarcity that has grounded movement across different parts of the country and caused a hike in the price of Premium Motor Spirit (PMS), widely known as petrol.
Additionally, the president has approved the temporary suspension of interim dividend payments to the federal government for the remainder of the year in order to further support NNPC’s financial obligations.
The national oil company has cited significant subsidy costs, which it refers to as a “subsidy shortfall/FX differential,” as the reason for its inability to remit taxes and royalties to the federal account.
Projections indicate that the total subsidy expenditure from August 2023 to December 2024 will reach a staggering N6.884 trillion, resulting in a shortfall of N3.987 trillion in taxes and royalties due to the federal government.
The NNPC’s decision to halt interim dividend payments for eight months will likely put additional pressure on the federal government’s finances, as well as those of state and local governments that rely on these funds.
Since the removal of the fuel subsidy by President Tinubu in May 2023, NNPC reportedly saved N400 billion monthly, allowing the company to remit N2.032 trillion in taxes and royalties to the Central Bank of Nigeria (CBN).
However, this gain was short-lived as the devaluation of the naira has caused financial strain on NNPC, prompting a request by the Group CEO, Mele Kyari, to pause remittances to the federal government account to allow it to ‘subsidize’ the dollar price of imported products.
Despite these measures, Nigerians have faced fuel scarcity for the better part of the year. This is amid an increase in the price of petrol, which has more than doubled since the removal of the subsidy.
Price checks by Neusroom on August 19, 2024, across different petrol stations, including Ikeja, Lagos, and Yaba, show that a litre sells between N850-900, while many stations were without products.
Also Read: Why the Seizure of Nigeria’s Presidential Jet Is ‘Africa’s Biggest Embarrassment’
