The Nigerian government’s outstanding debt to the Nigerian National Petroleum Company Limited (NNPC) now stands at almost half of its projected revenue for the year, as reported by Bloomberg on Monday.
NNPC’s Chief Financial Officer, Umar Ajiya, disclosed that the government owes the NNPC a staggering N7.8 trillion ($4.9 billion) in subsidy arrears accrued over seven months through July. This debt significantly contrasts with the N19.4 trillion the government expects to generate in revenue this year.
In May of last year, President Bola Tinubu removed the fuel subsidy to address the country’s fiscal issues, as debt-service payments had escalated to consume 96 percent of the nation’s revenue.
However, the subsidy was reintroduced in August to help mitigate the effects of soaring inflation, which has reached 33 percent, on the populace. Ajiya mentioned that the government will permit NNPC to offset approximately N2.2 trillion that it owes to the state against the subsidy debt.
The debt has accumulated because NNPC, being the sole importer of petrol, sells it to marketers at prices below the market rate to keep consumer costs down. Currently, a litre of petrol is priced at around N617 at NNPC stations in Abuja, whereas prices in other areas can exceed N1,000, which has led to increased cross-border smuggling.
Despite these financial pressures, NNPC recorded a profit of N3.3 trillion in 2023, up from N2.55 trillion the previous year. The company is planning to invest $6.6 billion into its operations this year, with most of the funding expected to come from borrowing.
Ajiya also highlighted that crude oil and condensate production is projected to increase to two million barrels per day by the end of the year, up from an average of 1.75 million barrels per day in August, supported by enhanced security efforts aimed at curbing oil theft.
