Business

NNPC Clarifies: Fuel Subsidy Payments Issues by Just Handling Import Shortfalls

Published by Tope Fakinlede on August 21st, 2024.

NNPC Clarifies: Fuel Subsidy Payments Issues by Just Handling Import Shortfalls

The Nigerian National Petroleum Company Limited (NNPC Ltd.) has clarified that it has not issued any fuel subsidies in the past nine months. This statement was made by the company’s Chief Financial Officer, Alhaji Umar Ajiya, in Abuja on Monday.

NNPC

Ajiya explained that NNPC Ltd. is managing the shortfall between the cost of importing Premium Motor Spirit (PMS) and the selling price set by the government. He emphasized that the company has not paid any subsidies, stating, “In the past eight to nine months, NNPC Ltd. has not disbursed any funds as a subsidy. No marketer has received payments from us for subsidies.”

He elaborated that while PMS is imported at a specific cost, the government mandates it be sold at a reduced price. The difference between the import cost and the lower selling price is considered a shortfall. According to Ajiya, the financial adjustments related to this shortfall are negotiated directly between NNPC Ltd. and the Federation, without involving subsidy payments to marketers.

Ajiya also noted that credit lines are standard in the global downstream oil industry. NNPC Ltd. previously maintained an open credit arrangement with PMS suppliers, which included term-line contracts for payments.

Dapi Segun, NNPC Ltd.’s Executive Vice President of downstream operations, added that while the company’s outstanding balance with suppliers is often reported, it is less than the widely cited $6.8 billion figure. He stressed that maintaining a reliable relationship with suppliers is crucial and that the balance fluctuates based on payments and deliveries.

Segun emphasized the importance of ensuring a steady supply of PMS across the country and maintaining transparency and reliability in financial dealings with suppliers.