The Nigerian National Petroleum Company Limited (NNPCL) said it faced financial challenges in 2022, remitting no funds to the Federation Account due to the burden of subsidizing Premium Motor Spirit (PMS).
The Chief Financial Officer of NNPCL, Umar Ajiya, revealed how the payment of fuel subsidies hindered the company’s ability to contribute taxes, royalties, and profits to the federation account, ultimately affecting its profitability.
The subsidy issue persisted until the new administration, led by President Bola Tinubu, declared the end of the subsidy regime in May 2023.
This action, enforced by NNPCL the following day, saved the nation approximately N400 billion monthly and the removal of the subsidy allowed the company to resume remittances, resulting in significant contributions.
Following the subsidy removal, NNPCL reported a surge in profits, growing from N674.1 billion in 2021 to N2.54 trillion by the third quarter of 2022 and the subsidy removal played a pivotal role in unlocking the company’s growth potential and preventing bankruptcy.
Meanwhile, the financial impact of the subsidy removal was substantial, as fuel subsidy costs amounted to over N3.3 trillion in 2022, while the Federal Government had previously struggled to keep petrol prices below global market rates.
Ajiya confirmed that, since the removal of the subsidy, the company has started making remittances and paying dividends to the Federation Account, contributing N4.5 trillion in the first nine months of 2023.
However, it was revealed that between September 2021 and December 2022, NNPCL incurred significant expenses, including estimated expenditures of N2.9 trillion on wages, entertainment, bank charges, and running costs.
The Audited Financial Statement for 2022 highlighted general and administrative charges, security expenses, entertainment costs, employee benefits, and various other expenditures.
The financial report showed that the NNPCL Group generated substantial revenue of N8.82 trillion in 16 months, with the company contributing N2.9 trillion from September 2021 to December 2022.
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