According to a recent report by Bloomberg, the Nigerian Federal Government owes the Nigerian National Petroleum Company Limited an amount nearly equivalent to half of its projected annual revenue for this year. This debt is associated with the petrol subsidy reintroduced in August last year.
As reported, NNPC’s Chief Financial Officer Umar Ajiya disclosed that the government’s subsidy debt to NNPC amounts to N7.8 trillion ($4.9 billion) for the seven months leading up to July. The government aims to generate N19.4 trillion in revenue by the end of the year.
Last year, Nigeria’s President Bola Tinubu had withdrawn the subsidy to address the country’s economic challenges due to soaring debt-service costs, which had reached 96% of revenues. However, it was reinstated to implement measures that could alleviate the impact of the country’s high inflation rate, currently at 33%.
Under an agreement mentioned in the report, NNPC will be allowed to offset a portion of the N2.2 trillion it owes the government against the subsidy debt. Ajiya shared this information in an interview following the company’s financial results announcement in Abuja.
The government’s debt accumulation to NNPC is primarily due to NNPC being the exclusive petrol importer, selling the product to retailers at prices below market rates to maintain affordability for consumers.
At NNPC retail stations in Abuja, a liter of petrol is priced at about N617, significantly lower than the price exceeding N1,000 in other regions, prompting illicit cross-border trafficking of the commodity.
In 2023, the state-owned oil company reported an annual profit of N3.3 trillion, a notable increase from N2.55 trillion in the previous year. It plans to allocate $6.6 billion towards operational investments this year, with a significant portion expected to be acquired through borrowing, as mentioned by Ajiya.
NNPC anticipates a boost in crude oil and condensates production, aiming to achieve a daily output of two million barrels by the end of the year, up from the average of 1.75 million barrels per day recorded in August. Improved security measures have been noted as crucial in combating oil theft, further aiding in production enhancements.