The Nigerian National Petroleum Company Limited (NNPCL) has requested a refund of N4.71 trillion from the Federal Government to cover outstanding debts related to the importation of Premium Motor Spirit (PMS), commonly known as petrol.
This claim, categorized as “Exchange Rate Differential on PMS and Other Joint Venture Taxes,” pertains to petrol imports made by the company between August 2023 and June 2024. The information was revealed by Wale Edun, the Minister of Finance and Coordinating Minister of the Economy, during a June meeting of the Federation Accounts Allocation Committee. Our correspondent obtained the meeting minutes on Thursday.
The term “exchange rate differentials” refers to the changes in value between currencies at different times, impacting the income of banks or government agencies involved in foreign exchange transactions. For instance, if one U.S. dollar exchanges for 0.9 euros today but 0.8 euros tomorrow, the differential is the change in these rates.
This request implies that the government will need to support fuel imports by covering the discrepancy between the projected exchange rate and the actual costs incurred by NNPCL for importing petrol. This cost difference, which usually affects the retail price of the product and is typically passed on to consumers, seems to undermine claims that subsidies have been fully removed.
The development also highlights ongoing issues faced by NNPCL in ensuring a steady supply of PMS to distributors across the country.
At the meeting, Minister Edun informed state finance commissioners that the NNPCL had received presidential approval to use the “Weighted Average Rate” for its operations from October 2023 to March 2024. The company also sought an extension to cover additional exchange rate differences, and was advised to formally request approval from the National Economic Council.
The minutes of the meeting noted: “NNPC Limited Exchange Rate Differentials on PMS Importation and Other Joint Venture Taxes for the period August 2023 to April 2024.”
“The chairman of the Post Mortem Sub-Committee reported that NNPC Limited has an outstanding claim of N2,689,898,039,105.53 against the federation due to the use of the ‘Weighted Average Rate’ as of May 2024. It was also disclosed that presidential approval was granted to use the ‘Weighted Average Rate’ from October 2023 to March 2024.”
Sources indicate that the government, through the National Economic Council, had authorized NNPC to import fuel at an exchange rate of N650 to $1 at retail coastal pump prices starting June 2023. However, due to the naira’s devaluation, the price surged to N1,200, revealing a N550 difference in exchange rates.