State governors have raised concern over Nigeria National Petroleum Company, NNPCL, accounting practices, saying it is skewed with irregularity and poor accounting practice. This is coming on the heel where the NNPCL is requesting an additional subsidy refund of N1.19 trillion for July 2024, citing exchange rate differentials on Premium Motor Spirit importation and joint venture taxes.
It was learned from the Federation Account Allocation Committee Postmortem Sub-Committee report for September 2024, the exchange rate differentials stood at N4.56tn as of June 2024 (due to under-recovery on petrol imports between August 2023 and June 2024), but this figure increased to N5.31tn by July 2024.
The NNPCL attributed the rise to fluctuations in foreign exchange rates and unresolved subsidy payments from previous months.
The total figure adds to concerns over the fiscal impact of subsidy payments on the Federation Account.
Exchange rate fluctuations and the rising cost of importing PMS have continued to strain government revenues, raising questions about the sustainability of the partial subsidy framework.
Committee raises concerns
However, the FAAC Sub-Committee have raised concerns over NNPCL’s accounting practices, noting discrepancies in the figures submitted the company.
Accordingly, the NNPCL’s report included N1.19tn as a balance brought forward, contributing to the overall claim of N5.31tn.
This is as the Sub-Committee noted that this amount had not been included in earlier FAAC reports and was therefore not recognised in its deliberations.
The report partly read, “As of June 2024, the Exchange Rate Differentials stood at N4,558,597,379,030.6. This amount increased to N5,309,418,715,637.13 as of the July 2024 Federation Account.
“Note that NNPCL’s request for the application of Weighted Average Rate covers the period August to June 2024. Also, recall that all outstanding payments against NNPCL as of May 2024 were referred to the Presidential Alignment Committee for reconciliation.
“However, the Sub-Committee observed that NNPCL in their report included the sum of N1,186,540,693,485.36 as an amount brought forward totalling N5,309,418,715,637.13 in their ledger. FAAC Postmortem did not recognize the Balance Brought Forward because it was not included in the FAAC report earlier submitted.”
During the September meeting with agencies, the NNPCL informed the FAAC Postmortem Sub-Committee that the N1.19tn figure was an actual under-recovery amount, which included adjustments for June and July 2024.
This amount, the NNPCL said, was used as the opening balance in its report.
In response, the Sub-Committee recommended that the NNPCL re-submit the figure for consideration at the next plenary.
The report noted, “During the monthly reconditioning meeting with Agencies, NNPCL informed the meeting that the amount submitted to the Presidential Alignment Committee for under-recovery was estimated. The actual under-recovery of N1,186,540,693,485.36, including June and July 2024, resulted in the opening balance in the NNPCL report.
“The Sub-Committee resolved that since NNPCL’s earlier report to FAAC did not include the sum of N1,186,540,693,485.36 brought forward, NNPCL should re-submit the amount for FAAC Plenary noting.”
Missing documentation
Further analysis of the NNPCL’s claims revealed additional issues. Minutes of a previous FAAC meeting revealed that as of June 2024, the NNPCL had reported an outstanding claim of N4.34tn against the Federation.
The claim, which was tied to exchange rate differentials, lacked essential details, including the volume of PMS imported, pricing, and sales values.
According to the Federal Commissioner of the Revenue Mobilisation, Allocation, and Fiscal Commission disclosed that the omission of such vital details has made it difficult for the Sub-Committee to justify the figures submitted.
Consequently, the sub-committee directed the NNPCL to provide all relevant information to enable further assessment of its claims.
The FAAC Postmortem Sub-Committee has emphasised the need for transparency and accountability in subsidy-related reporting.
He added that such discrepancies have stalled the work of the sub-committee which necessitated involving the Presidential Alignment Committee.
The sub-committee also urged the NNPCL to ensure the inclusion of all outstanding amounts and a comprehensive breakdown of its PMS importation records in future reports.
The minutes for one of the FAAC meetings, which was seen by The PUNCH, noted, “The Federal Commissioner, RMAFC, informed the meeting that NNPC Limited reported to the Sub-committee that it had an outstanding claim of N4,344,519,176,167.32 against the Federation as a result of exchange rate differentials as at June 2024.
“He stated that the Sub-committee observed that the details of the PMS volume, price, and sales value were not provided in the June 2024 Report of NNPC Limited to justify the exchange rate differentials recorded. He concluded that the Sub-committee had resolved to request NNPC Ltd to provide the relevant information for further consideration.”
Meanwhile, this is as the NNPCL is demanding a fresh refund of N4.7tn from the federal government to off-set outstanding debts used to import Premium Motor Spirit, popularly called petrol, into the country.
However, the NNPCL clarified that the N4.71tn was just an estimate, and the actual figure was N4.34tn, which increased to N5.31tn by July 2024.
This development means that the government has been supporting fuel imports by covering the difference between the projected rate and the actual expenses incurred by the NNPCL for importing petroleum products into the country.
This difference in cost, which ordinarily should be reflected in the retail price of the product and borne by final consumers, contradicts the government’s claims that subsidies have been eliminated.
This revelation also comes amid challenges faced by the petroleum company to ensure the adequate supply of PMS to marketers for distribution nationwide.
On May 29, 2023, during his inauguration, President Bola Tinubu publicly declared that “subsidy is gone,” signalling the end of barriers that had been restricting the nation’s economic growth.
However, this claim has been contested by the International Monetary Fund, the World Bank, and other authoritative figures, who argue that the government had quietly reintroduced fuel subsidies. PUNCH.
