The Federal Government and the Nigerian National Petroleum Company Limited (NNPCL) have commenced negotiations on the payment to the company the N7.7 trillion foreign exchange (FX) rate differentials and other joint venture taxes on the importation of Premium Motor Spirit (petrol) as of September 2024, when the full implementation of downstream oil sector commenced.
Exchange rate differentials refer to the incomes that accrue to banks or government agencies from the differences in value between two currencies at different times based on FX sale and purchase prices.
The company made this disclosure at the Federation Account Allocation Committee’s (FAAC’s) February meeting on Monday in Abuja.
According to the document submitted by the NNPCL’s management to the committee, the government is making arrangements to offset the huge subsidy liability within a period of 210 days.
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A breakdown of the fuel subsidy claims showed that the total sum of the FX differentials due for repayment by the Federal Government totalled N10.499 trillion, but N2.756 trillion was the FX rate differentials recovered between November 2023 and September 2024, which reduced the cumulative outstanding payment to N7.74 trillion.
An analysis of the outstanding fuel subsidy debt of the government on a month-by-month basis reflected that the debt with an outstanding balance of N1.29 trillion rose to N1.402 trillion in June 2023. In July it increased to N1.48 trillion, N1.535 trillion in August, N1.59 trillion the following month, to N1.81 trillion in October 2023, further to N2.378 trillion in November and surged to N2.94 trillion in December 2023.
In January 2024, the document presented to the FAAC by the state-controlled oil company increased to N3.57 trillion, up to N3.96 trillion in February, and further rose to N4.68 trillion, N5.81 trillion, N6.47 trillion, and N6.97 trillion in March, April, May, and June 2024 respectively.
By July 2024, the fuel subsidy FX rate differentials the government is due to pay the NNPCL had increased to N7.46 trillion, N7.66 trillion in August, and N7.74 trillion in September 2024.
