In a move that has reignited the debate over Nigeria’s fuel subsidy regime, the federal government has confirmed plans to settle a staggering N7.74 trillion fuel subsidy debt owed to the Nigerian National Petroleum Company Limited (NNPCL).
The debt, which accrued as an exchange rate differential on the importation of Premium Motor Spirit (PMS), spans from June 2023 to September 2024, coinciding with the country’s full-scale deregulation of the downstream oil sector.
The figure was disclosed in a document presented by the NNPCL to the Federation Account Allocation Committee (FAAC) during its February meeting in Abuja, as reported by PUNCH. According to the document, the government has committed to clearing the outstanding subsidy within 210 days.
Initially, the fuel subsidy debt stood at N10.499 trillion, but N2.756 trillion was recovered between November 2023 and September 2024, leaving a balance of N7.74 trillion. A breakdown of the debt accumulation over time paints a concerning picture:
June 2023 – N1.402 trillion
July 2023 – N1.48 trillion
October 2023 – N1.81 trillion
March 2024 – N4.68 trillion
June 2024 – N6.97 trillion
September 2024 – N7.74 trillion
This subsidy debt now accounts for 14.07% of Nigeria’s N54.99 trillion proposed 2025 national budget, raising critical concerns about the country’s economic sustainability.
The revelation of this subsidy repayment raises fresh doubts about President Bola Tinubu’s claim in May 2023 that fuel subsidies had been removed. Reports from the International Monetary Fund (IMF) and World Bank suggest that the government had quietly reintroduced subsidies through price stabilization measures.
In August 2024, the NNPCL requested a refund of N4.71 trillion from the federal government for petrol imports, citing exchange rate differentials on PMS and other joint venture taxes. Exchange rate differentials arise when fluctuations in the value of the naira increase the cost of importing petroleum products. In this case, the government is covering the difference between the official exchange rate and NNPCL’s actual importation costs.
The government’s commitment to reimbursing the NNPCL has sparked criticism from economic analysts and industry experts. Professor Wumi Iledare, an energy expert, questioned the rationale behind the repayment, arguing that NNPCL should be remitting funds to the government, not seeking reimbursements.
> “If NNPCL sells oil on behalf of the government and receives dollar revenue, why should the government pay back any money? NNPCL should be remitting funds like other oil companies,” Iledare stated.
Furthermore, members of FAAC have raised concerns over inconsistencies in NNPCL’s revenue reporting. Ogun State Accountant-General, Tunde Aregbesola, highlighted a sharp decline in the company’s revenue remittances, citing an outstanding balance of N10.8 trillion in receivables.
In response to growing concerns, FAAC Chairperson Oluwatoyin Madein assured that an alignment committee is currently reviewing NNPCL’s financial records to ensure proper reconciliation. However, doubts persist over the government’s ability to prevent further subsidy-related liabilities.
With rising inflation, a weakened naira, and unstable foreign exchange rates, economic experts warn that Nigeria risks falling into another cycle of unsustainable fuel subsidy debts. They argue that unless long-term economic reforms are implemented—such as refining more petroleum products locally—Nigeria may find itself trapped in a recurring fuel subsidy crisis.
As the government prepares to clear the N7.74 trillion debt, the real question remains: Is this a step towards economic stability or another cycle of financial mismanagement?
PIONEER NEWS 