President Tinubu has approved the use of NNPC dividends to fund petrol subsidies. Learn about the decision and its impact on fuel prices and the economy.
The utilization of the 2023 end-of-year profits due to the federation by the Nigerian National Petroleum Company (NNPC) Limited for petrol subsidies has been approved by President Bola Tinubu.
As a means of coping with the financial burden caused by subsidy payments, The Cable has announced that this decision was made.
Furthermore, President Tinubu has directed the NNPC to suspend its payment of interim dividends for 2024 in order to address their financial challenges.
A projection obtained by The Cable estimates that petrol subsidy expenses could total N6.884 trillion between August 2023 and December 2024, potentially preventing the NNPC from remitting N3.987 trillion in taxes and royalties to the federation’s account.
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According to the Petroleum Industry Act (PIA), the NNPC must provide taxes, royalties, and dividends to its exclusive shareholder -the federation.
Nonetheless, in June 2024, President Tinubu was informed by the NNPC that their increasing subsidy payments were impacting their cash flow significantly and endangering their continuity as a business entity.
The company cited worries about maintaining petrol imports because of mounting forex pressure caused by an escalating subsidy burden.
To tackle these challenges, NNPC has planned to suspend the distribution of interim dividends from May till December 2024. Every month, these interim dividends are transferred into the federation account and then divided among all three levels of government.
After financial reconciliation at year-end, ultimate payouts are made for profits earned by the end of that year.
The president’s decision showcases the consistent endeavor to tackle the fiscal obstacles presented by the subsidy system and guarantee uninterrupted efficiency of NNPC amidst these strains.
