NNPC confirms selling petrol at half landing cost, denies paying subsidy

The Nigerian National Petroleum Company (NNPC) Ltd has confirmed that it is selling petrol, also known as premium motor spirit (PMS), at only half of its landing cost.

Umar Ajiya, NNPC’s Chief Financial Officer, stated in Abuja on Monday that the company is covering what he termed a “shortfall” rather than providing a subsidy.

The official pump price of petrol in Nigeria is approximately N600 per litre, while the landing cost is around N1,200 per litre.

Ajiya revealed to Bloomberg that NNPC has spent N7.8 trillion in the first seven months of the year to cover this shortfall.

Subsidies are typically understood as selling a product below its cost price, and in official communications between NNPC and the presidency, the term “subsidy” has been used to describe this shortfall.

President Bola Tinubu recently approved NNPC’s request to use the 2023 final dividends owed to the federation to cover these costs.

However, during a media briefing on NNPC’s 2023 audited financial statements, Ajiya denied the presence of a subsidy, clarifying that the company was merely “addressing the shortfall on petrol importation.”

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He added that no payments have been made to marketers for subsidies in the last eight to nine months, as NNPC is the sole importer of petrol through contracts with suppliers.

“In the last eight to nine months, NNPC Ltd. has not paid anyone a dime as a subsidy; no marketer has received any money from us in the name of subsidy,” Ajiya emphasized.

He explained that the difference between the landing cost and the selling price is managed internally between NNPC and the Federation, with no direct payments to marketers.

Despite these explanations, Ajiya did not clarify how much of the N7.8 trillion could have been deposited into the federation account if NNPC was not covering the shortfall.

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Critics, including Waiziri Adio, Executive Director of Agora Policy and former Executive Secretary of the Nigeria Extractive Industries Transparency Initiative (NEITI), have accused NNPC of being disingenuous in its explanations.

“NNPCL’s waffling on petrol subsidy is so disingenuous,” Adio posted on X (formerly Twitter). He criticized the company’s attempt to differentiate between a subsidy and a shortfall, calling it a “lame play with words.”

The controversy highlights ongoing concerns about transparency in Nigeria’s fuel subsidy policy and the financial management of the country’s petroleum resources.