The amount spent as subsidy on Premium Motor Spirit, popularly called petrol, and on refinery rehabilitation between January and May this year was N1.301tn, figures released on Monday by the Nigerian National Petroleum Company Limited showed.
NNPC disclosed this in its latest presentation to the Federation Account Allocation Committee meeting for the month of June 2022.
Bulk of the oil firm’s spending was on petrol subsidy, as it consumed N1.274tn during the five-month period, while for refinery rehabilitation, NNPC spent N9.11bn in each of the months of January, March and April, amounting to N27.33bn.
An analysis of NNPC’s monthly fuel subsidy spendings indicated a continuous rise in the amount incurred as subsidy by the Federal Government through NNPC
Data from the national company showed that N210.38bn, N219.78bn, N245.77bn, N271.59bn and N327.1bn were used in subsidising PMS in January, February, March, April and May 2022 respectively.
NNPC is the sole importer of petrol into Nigeria for several years running. Nigeria’s four refineries are not working, though the Port Harcourt refinery is currently under rehabilitation.
The national oil company refers to its subsidy spendings as under-recovery/value shortfall, and deducts it every month before making any remittance to FAAC, a development that has stopped NNPC from remitting anything to the Federation Account this year.
In its latest presentation to FAAC, the oil firm also informed the committee that it would deduct N845.15bn from what would be shared by the committee next month.
“The value shortfall on the importation of PMS recovered from May 2022 proceeds is N327,065,907,048.06, while the outstanding balance carried forward is N617bn,” NNPC stated.
It added, “The estimated value shortfall of N845,152,863,012.97 (consisting of arrears of N617bn plus estimated May 2022 value shortfall of N227,721,200,478.23) is to be recovered from June 2022 proceed due for sharing at the July 2022 FAAC meeting.”
The amount spent on petrol subsidy monthly has been depleting the revenues accruable to the Federation Account and limiting the funds being shared by the three tiers of government.
On Monday, the amount spent as subsidy by the Federal Government on every litre of petrol consumed in Nigeria was currently above N600, according to figures from oil sector operators.
The report also revealed that the latest PMS evacuation data from NNPC showed that the year-to-date daily consumption of petrol in Nigeria was 66.8 million litres.
It stated that based on the above figure, it therefore implied that the Federal Government would be spending about N40.1bn daily when subsidising every litre of petrol consumed in Nigeria by at least N600.
The huge spending on subsidy had made experts and operators intensify the call for the fast rehabilitation of Nigeria’s refineries.
A renowned energy expert and Technical Director at Template Design Limited, Baka Zaka, who kicked against the push for PMS deregulation, told our correspondent that one of the remedies to subsidy spending by the government was for the country’s refineries to work.
Also, a former President, Association of National Accountants of Nigeria, Dr. Sam Nzekwe, stated that a total halt petrol subsidy would not go down well among the masses, as he urged the government to fix the refineries.
“Subsidy removal should be gradual, but most importantly is the call for our refineries to work so as to halt spending the bulk of our foreign exchange on petroleum products’ imports,” he said.
In April this year, the Minister of State for Petroleum Resources, Chief Timipre Sylva, said the April 2023 completion date for the rehabilitation of the Port Harcourt refinery was feasible and that the plant would refine 60,000 barrels of crude by early next year.
“This project kicked off second quarter last year and where they are now is quite impressive. It is on schedule. The commitment is to deliver 60,000 barrels per day from this refinery by the first quarter of next year, and, of course, we are quite happy,” Sylva had stated while inspecting the facility.
NNPC officially signed the contract with Tecnimont SPA for the $1.5bn rehabilitation programme of the Port Harcourt Refining Company in April 2021 and had promised that the facility would be completed in 18 months.
The Deputy National President, Independent Petroleum Marketers Association of Nigeria, Zarma Mustapha, also stated that fixing Nigeria’s refineries was one major way to halt the huge subsidy spending.
He said, “If we have refining capacity, the government would have found a way of cushioning the effect of the rise in prices. However, since we don’t have refining capacity and we use the dollar to purchase products abroad, we will have no control over prices.
“This speaks to why it is important for the country to fix its refineries and start refining crude oil locally.