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The Nigerian National Petroleum Company Limited (NNPCL) is seeking a refund of ₦4.71 trillion from the Federal Government to cover outstanding debts incurred from importing Premium Motor Spirit (PMS), commonly known as petrol, into Nigeria.
This request is detailed as “Exchange rate differential on PMS and other joint venture taxes” for the petrol imported by the company from August 2023 to June 2024.
According to the Punch, this information was revealed by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, during the Federation Accounts Allocation Committee meeting in June.
Exchange rate differentials represent the gains or losses arising from fluctuations in currency values between two different times, as experienced during the buying and selling of foreign exchange by banks or government entities.
For instance, if you exchange one United States dollar for 0.9 euros today, and tomorrow it changes to $1 for 0.8 euros, the exchange rate differential is the change between these two rates.
This situation implies that the government will subsidize fuel imports by covering the disparity between the anticipated exchange rate and the actual costs incurred by NNPCL for bringing petroleum products into the country.
Typically, this cost difference would be included in the retail price of fuel and paid by consumers, contradicting the government’s assertion that subsidies have been eliminated.
This disclosure also arises amid the petroleum company’s challenges in ensuring an adequate supply of PMS to marketers nationwide.
During the meeting, the minister informed the state finance commissioners that NNPCL received presidential authorization to execute this responsibility using the “Weighted Average Rate” from October 2023 to March 2024.
Edun further stated that the company sought an extension of this period to cover the differential rate but was advised to write to the National Economic Council to request approval.
According to the minutes, “NNPC Limited Exchange Rate Differentials on PMS Importation and Other Joint Venture Taxes for the period August 2023 to April 2024.
“The chairman, PMSC (Post Mortem Sub-Committee) reported that NNPC Limited informed the sub-committee that it had an outstanding claim of ₦2,689,898,039,105.53 against the federation as a result of the use of ‘Weighted Average Rate’ as of May 2024.
“Furthermore, he disclosed that the sub-committee was able to establish that there was Presidential approval to use the ‘Weighted Average Rate’ from October 2023 to March 2024.”
It has been revealed that the government, through the National Economic Council, allowed NNPCL to import fuel at an exchange rate of ₦650 to $1 for retail coastal pump prices starting in June 2023.
However, due to the devaluation of the naira, this rate surged to ₦1,200, resulting in an exchange difference of ₦550.
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