In order to pay off outstanding bills related to the importation of Premium Motor Spirit, often known as gasoline, into the nation, the Nigerian National Petroleum Company Limited (NNPCL) has claimed a return of N4.71 trillion from the Federal Government.
The claim for gasoline products that the corporation imported between August 2023 and June 2024 was titled ‘Exchange rate differential on PMS and other joint venture taxes.’
At the June meeting of the Federation Accounts Allocation Committee, Wale Edun, the Coordinating Minister of the Economy and the Minister of Finance, made this revelation. The minutes of the Thursday meeting were obtained by our correspondent.
Exchange rate differentials are the profits earned by banks or government organizations as a result of two currencies’ differing values at various periods through the sale and buy prices of foreign exchange.
The difference in these two rates is known as the exchange rate differential. For instance, if you exchange one US dollar for 0.9 euros today and obtain $1 for 0.8 euros tomorrow, the exchange rate disparity is $1.
As a result of this development, the government will additionally support fuel imports by paying the difference between the anticipated rate and the actual costs spent by the NNPC in bringing petroleum products into the nation.
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The government’s assertions that subsidies have been removed are refuted by this cost differential, which typically should be included in the product’s retail price and paid for by end users.
Additionally, the petroleum firm is having difficulty ensuring that merchants have a sufficient supply of PMS. for countrywide dissemination.
The national oil corporation was given presidential clearance to perform this obligation using the ‘Weighted Average Rate’ from October 2023 to March 2024,
the minister informed the state commissioners of finance during the meeting.
Additionally, Edun said, the company had asked for a longer time frame to cover the differential rate, but had been told to approach the National Economic Council to request permission.
‘NNPC Limited Exchange Rate Differentials on PMS Importation and Other Joint Venture Taxes for the period August 2023 to April 2024’ was what was written in the minutes.
‘NNPC Limited notified the PMSC (Post Mortem Sub-Committee) chairman that it had an outstanding claim of N2,689,898,039,105.53 against the federation as a result of the use of As of May 2024, the ‘Weighted Average Rate’
He also said that the subcommittee was able to prove that the President had given the go-ahead to employ the ‘Weighted Average Rate’ between October 2023 and March 2024.
Information surfaced that the National Economic Council, on behalf of the government, had authorized the NNPC to import fuel beginning in June 2023 at a retail coastal pump price of N650 to $1.
However, the depreciation of the naira caused the price to spike to N1,200, indicating a N550 exchange difference.
During his inauguration on May 29, 2023, President Bola Tinubu made a public statement stating that “subsidy is gone,” indicating the removal of obstacles preventing the country’s economic progress.
However, the has refuted this assertion. Leading organizations such as the World Bank and the International Monetary Fund contend that fuel subsidies have been covertly reinstated by the government.
The government intended to spend almost N5.4 trillion on fuel subsidies, according to a draft paper for an economic stabilization plan published in June.
The monthly subsidy on PMS has increased to around N707bn, according to oil marketers, with a landing cost of ₦1,117 per litre.
In response, Akwa Ibom State’s commissioner of finance, Linus Nkan, asked for more information on the origins of the N2.6 trillion exchange rate discrepancies with the federation.
Referring to paragraphs 3.01 and 5.01 of the PMSC report, the Commissioner of Finance for Akwa Ibom State asked for explanations on the origins of the N2.6 trillion exchange rate differentials versus the Federation. said the minute.
The company’s claim for the sum was to cover PMS landing costs, as acknowledged by Joshua Danjuma, General Manager of the FAAC office at the NNPCL, in response.
hadAccording to him, the cost has also gone up dramatically by May 2024 as a result of exchange rate fluctuations.
‘In response to the matter of NNPC Ltd’s N2.6tn claim against the Federation, the representative of NNPC Limited verified that the amount had considerably increased as of May 2024 because of the shift in the rate at which the company was sourcing for the Forex to pay for the PMS landing cost,’ he stated.
An additional document that The Viztadaily News was able to get confirms this, saying that as of June 2024, the figure had climbed to N4.71tn.
A breakdown of the debt by month showed that, from an initial outstanding balance of N1.18 trillion, it climbed to N1.24 trillion in August 2023, N1.3 trillion in September 2023, and N1.51 trillion in October 2023.
These claims rose to N2.08 trillion by November and N2.63 trillion by December 2023, totaling N570 billion and N550 billion, respectively.
The report further stated that as of January 2024, the figure was N3.19 trillion, growing to N3.29 trillion in February, N3.55 trillion in March, N4.02 trillion in April, N4.29 trillion By June 2024, it will reach N4.71 trillion from May.
Additionally, during a presentation at the meeting, Mohammed Bello, the Chairman of the Revenue Mobilization Allocation and Fiscal Commission, disclosed the rationale behind the rate discrepancy,
stating that ‘NNPCL made the necessary pricing adjustments using an exchange rate benchmark of after the subsidy on PMS was removed on May 29, 2023.’
Retail coastal pump pricing will be determined by multiplying N650 by $1 US starting in June 2023.
Additionally, in order to maintain the supply of petroleum products and guarantee national energy security, NNPCL requested and received permission from His Excellency,
Mr. President, I would like to use foreign exchange modulation to freeze the invoice format Ex-coastal transfer price at N524.99 from August 2023 to March 31st, 2024.
NPCL further stated that, despite the Sub-Committee having not yet seen the document, the Company has received additional authority to extend the use of the weighted average rate from April to June 2024.
NNPCL declared the outstanding balance regarding the exchange rate disparity against the Federation as of June 2024.
Additionally, the Sub-Committee noted in the NNPCL June 2024 report to the FAAC that the The weighted average exchange rate for the month was N1,200, according to the source. This figure was approximated, not the N650 that the NEC extract had requested.
Additionally, the investigation revealed that the volume, price, and sales value were not offered as justifications for the noted exchange rate disparity.
‘NNPCL said that more details might be sent to the Sub-Committee upon request in order to elucidate the matters brought up.
It was decided by the meeting’s chairman, the Chairman of the Commission, to write to NNPCL and ask for the necessary data to address the problem.
Meanwhile, Lawal Maikano, the Niger State Commissioner of Finance, bemoaned the inability of income-generating organizations to reach its revenue objective, emphasizing that just 50% of the budgeted revenue for The year we are in has been accomplished.
‘The HCF, Niger State, referred to the Communique and noted that the RGAs were only achieving about 50% of the budgeted revenue for the current year, and they described this as a poor performance of the budget.’
So he kept repeating that the FAAC revenue stream prediction had to be changed to a number that the RGAs could actually reach.
He also urged the Agencies to focus more of their efforts on generating income.
The buildup of unpaid revenue arrears by RGAs against the Federation Account, which was approaching trillions of naira between 2023 and 2024,
also caused the HCF, Kaduna State, Shizzer Bada, to express worry. She thus counseled on the necessity of acting quickly. return their money? Does the NNPC say it paid them too much?
Royalties, corporate income tax, and Nigerian hydrocarbon tax must be paid to the government by the NNPC if it is truly going to adhere to its new status. They must make the same payment to the government as do multinational corporations.
The NNPC shall pay the government in dollars if the agreement is denominated in dollars. It is the duty of the government to decide what to do with the money.
When it comes to the taxes that the foreign oil firms pay, you can see that they are paying taxes on the oil that NNPC sells to the government on its behalf.
It is therefore quite difficult for me to comprehend why the Federal Government must refund any Iledare said, ‘It is therefore very difficult for me to understand why the Federal NNPC declares that it is the one providing the government with funding in dollars, hence the government must return any funds to the NNPC.
Since it currently has more than it had when the exchange rate was N700, the government is unable to maintain the windfall gain. The government is also changing the exchange rate to the tune of N1,500.
‘I find it extremely challenging to understand the reasoning behind this,’ the scholar continued, ‘because the government owns the royalty oil that the NNPC is selling on its behalf, the government owns the equity, and the government owns the tax oil.’
Still, he stated that this would be a nice of inadequate compensation for the importation of gasoline
‘If the dispute revolves around what they refer to as under-recovery, then indicates that NNPC paid for the import of petroleum with government funds,
and I’m confused as to why the government is paying them the under-recovery in naira. It is quite difficult to comprehend.
For this reason, the act governing the petroleum industry aimed to end the Federal Government’s reliance on the NNPC.
It should be noted that NNPC does not always belong to the federal government. According to him, the NNPC is owned by the federal system.
NNPCL
