The Nigerian National Petroleum Company Limited has demanded a refund of N4.71tn from the Federal Government to settle outstanding debts used to import Premium Motor Spirit, popularly called petrol, into the country.
The claim was listed as โExchange rate differential on PMS and other joint venture taxesโ on petrol products imported by the company between August 2023 to June 2024.
This was disclosed by the Minister of Finance and the Coordinating Minister of the Economy, Wale Edun, at the June meeting of the Federation Accounts Allocation Committee. Our correspondent obtained the minutes of the meeting on Thursday.
Exchange rate differentials refer to the income accrued to banks or government agencies from the difference in value between two currencies at different times through foreign exchangeโs sale and purchase prices.
For example, if you exchange one United States dollar for 0.9 euros today, and tomorrow you get $1 for 0.8 euros, the exchange rate differential is the change between these two rates.
This development also means that the government will support fuel imports by covering the difference between the projected rate and the actual expenses incurred by the NNPC 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 governmentโs 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.
Speaking at the meeting, the minister explained to the state commissioners of finance that the national oil company received presidential approval to carry out this duty using the โWeighted Average Rateโ from October 2023 to March 2024.
Edun added that the company had also sought an extension of the period to cover the differential rate but was advised to write to the National Economic Council requesting approval.
The minutes read, โNNPC Limited Exchange Rate Differentials on PMS Importation and Other Joint Venture Taxes for the period August 2023 to April 2024.
โThe chairman, PMSC (Post Mortem Sub-Committee) reported that NNPC Limited informed the sub-committee that it had an outstanding claim of N2,689,898,039,105.53 against the federation as a result of the use of โWeighted Average Rateโ as of May 2024.
โFurthermore, he disclosed that the sub-committee was able to establish that there was Presidential approval to use the โWeighted Average Rateโ from October 2023 to March 2024.โ
It was gathered that the government through the National Economic Council had granted the NNPC permission to import fuel at an exchange rate of N650 to $1 at retail coastal pump prices from June 2023 but the devaluation of the naira surged the price to N1,200, indicating a difference of N550 as exchange difference.
On May 29, 2023, during his inauguration, President Bola Tinubu publicly declared that โsubsidy is gone,โ signaling the end of barriers that had been restricting the nationโs 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.
In June, a proposed economic stabilisation plan document stated that the government planned to spend about N5.4tn on fuel subsidies.
Also, oil marketers had stated that with a landing cost of โฆ1,117 per litre for PMS, the monthly subsidy on the commodity had risen to approximately N707bn.
Commenting, the commissioner of Finance, Akwa Ibom State, Linus Nkan, queried how the N2.6tn exchange rate differentials against the federation came about, seeking further clarification.
โThe Commissioner of Finance, Akwa Ibom State, referred to paragraphs 3.01 and 5.01 of the PMSC report and requested clarifications as to how the N2.6tn exchange rate differentials against the Federation came about,โ the minute said.