FG Reintroduces Fuel Subsidy, to Pay NNPC Trillions of Naira Debt from Projected Revenue

• Nearly half of Nigeria's projected profits for this year are projected to be owed to its state-owned oil company for subsidy debt
• This is as President Bola Tinubu of Nigeria restored the subsidy that he had removed in May of last year
• NNPC announced a N3.3 trillion profit for 2023, marking an increase from N2.55 trillion the year before

Legit.ng journalist Zainab Iwayemi has over 3-year-experience covering the Economy, Technology, and Capital Market.

Nigeria owes its state-owned oil business almost half of its anticipated earnings for this year because it reinstated a petrol subsidy in August.

According to NNPC's chief financial officer, Umar Ajiya, the government owes the company 4.9 billion dollars (7.8 trillion naira) in subsidy debts for the seven months ending in July. This year, the government wants to earn 19.4 trillion naira in income.

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NNPC sends message to Nigerians on ‘return of subsidy,' sets date to end petrol scarcity

Bloomberg reported that President Bola Tinubu of Nigeria restored the subsidy that he had previously removed in May of last year in an effort to help the state's finances recover after debt service expenses skyrocketed to 96% of state revenue. The decisions to return subsidies were taken to allow for the introduction of policies aimed at protecting Nigerians from the country's 33% soaring inflation.

In an interview following the company's results announcement in the capital, Abuja, Ajiya stated that the government would permit NNPC to use the approximately 2.2 trillion naira it owes the state as collateral against the subsidy debt.

Because the NNPC is the only importer of gasoline and resells it to marketers at a discount to the market price to maintain low prices, the government has accrued debt to the company.

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NNPC declares massive profit of over N3trn, highest in 46 years, gives breakdown

Fuel smuggle factor

Fuel is smuggled across borders at NNPC retail stations in Lagos, the commercial metropolis, where a liter costs roughly 617 naira at the pump, compared to over N1,000 in neighboring nations.

In 2023, the state-owned oil corporation reported a yearly profit of 3.3 trillion naira, up from 2.55 trillion naira the previous year. According to Ajiya, it intends to spend $6.6 billion on operations this year, the majority of which will come from borrowing.

Oritsemeyiwa Eyesan, executive vice president of the company's upstream division, stated that it anticipates increased production of crude and condensates to reach 2 million barrels per day by year's end, from an average of 1.75 million barrels per day in August. This increase is expected to be aided by enhanced security measures to prevent oil theft.

NNPC gives reason for new fuel prices

Legit.ng reported that the Nigerian National Petroleum Company Limited (NNPC Ltd) has addressed the current fuel scarcity in the country, which has led to pump price adjustments at filling stations.

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In a statement signed by Olufemi Soneye, its chief corporate communications officer, NNPC Ltd said the current scarcity is due to distribution challenges.

Champions report that NNPC Ltd urges motorists to shun panic buying as it is working round the clock with relevant stakeholders to restore normalcy.

Proofread by Kola Muhammed, journalist and copyeditor at Legit.ng

Source: Legit.ng