Nigeria’s fuel subsidy debt to the NNPCL reached N7.74tn by September 2024, with measures in place for settlement within 210 days

The Federal Government’s indebtedness to the Nigerian National Petroleum Company Limited (NNPCL) has escalated to a staggering N7.74 trillion as of September 2024.

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This debt is the result of the government’s effort to maintain affordable fuel prices amid rising import costs, following the full implementation of the deregulation of the downstream oil sector.

The subsidy debt, covering the period from June 2023 to September 2024, reflects the government’s commitment to covering the cost differential between the higher rates at which petrol is imported and the retail prices in the domestic market.

This was disclosed in a presentation made by the NNPCL to the Federation Account Allocation Committee (FAAC) during its February meeting in Abuja. A copy of the document was obtained by our correspondent on Monday.

According to the FAAC document, the Nigerian government is exploring various measures to settle this N7.74 trillion fuel subsidy debt within a period of 210 days.

This effort comes after the NNPCL made a previous demand in August 2024, seeking a refund of N4.71 trillion from the government to cover outstanding debts for the importation of petrol.

These debts, categorized as “exchange rate differential on PMS and other joint venture taxes,” were incurred between August 2023 and June 2024.

The exchange rate differential, which plays a significant role in the subsidy scheme, refers to the difference in value between the foreign exchange rates at the time of importation and those used by the government to cover the costs.

Essentially, this is the financial gap that emerges when the NNPCL imports petroleum products at a higher rate than the government sells them to consumers.

For example, if the exchange rate for the US dollar fluctuates from N1,600 to N1,500 over time, the NNPCL must absorb the difference, leading to significant financial claims against the government. This under-recovery of costs is expected to be recouped through future payments from the government.

A detailed breakdown of the NNPCL’s claim shows that while the total sum of the exchange rate differential stood at N10.499 trillion, N2.756 trillion had already been recovered between November 2023 and September 2024, reducing the outstanding debt to N7.74 trillion.

The payment of this debt is ongoing, with the government planning to clear the balance within the 210-day period.

The NNPCL’s outstanding debt has been steadily increasing since June 2023, reaching N7.74 trillion by September 2024, a 14.07% of Nigeria’s 2025 national budget of N54.99 trillion.

Over the past year, monthly claims have risen from N1.29 trillion in June 2023 to N7.74 trillion by September 2024. This steady increase has highlighted concerns about the sustainability of the subsidy scheme, particularly as global oil prices remain volatile and exchange rates continue to fluctuate.

The deregulation of the fuel sector, which President Bola Tinubu officially declared in May 2023, was expected to end the subsidy regime. However, despite this declaration, international institutions such as the International Monetary Fund (IMF) and World Bank have noted that the government has effectively continued subsidising fuel imports.

In response, experts, including energy analyst Wumi Iledare, have questioned the rationale behind the government’s ongoing subsidies, given the NNPCL’s role in selling oil on behalf of the government.

The FAAC committee has raised concerns about inconsistencies in the financial reports from the NNPCL. Ogun State’s Accountant-General, Tunde Aregbesola, highlighted discrepancies between the reported revenue in November and the subsequent months, leading to questions about the accuracy of the financial figures.

Reports suggest that NNPCL may still be in the process of reconciling its figures, with receivables from the company amounting to around N10.8 trillion.

This has created further uncertainty about the actual financial obligations of the government and the national oil company. In response, the FAAC Chairman, Oluwatoyin Madein, stated that the matter was under review by the Alignment Committee and that the reconciliation process was expected to be concluded soon, covering up to December 2024.

As the reconciliation continues and efforts to resolve the outstanding subsidy debt unfold, the long-term implications for Nigeria’s economic stability remain uncertain.