FG Begins Audit of N2.7tn Subsidy Debt, Enlists Auditor General

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KThe Federal Government has initiated an audit of the Nigerian National Petroleum Company Limited’s (NNPCL) N2.7 trillion fuel subsidy claims. This audit follows an initial review by KPMG, which reduced the claims from N6 trillion to N2.7 trillion.

In the new audit, the government has approved the engagement of the Office of the Auditor General of the Federation to verify NNPCL’s subsidy claims. This move was confirmed by Ali Mohammed, Director of Home Finance, during the April 2024 Federal Account Allocation Committee (FAAC) meeting. An update on the audit process is expected at the May FAAC meeting.

The Press reported last month that the audit will cover the period from 2015 to 2021, aiming to authenticate NNPCL’s claims. On May 30, 2023, shortly after President Bola Tinubu declared “subsidy is gone,” NNPCL’s Group Chief Executive Officer, Mele Kyari, announced that the federal government still owes NNPCL N2.8 trillion for petrol subsidies.

Kyari explained that NNPCL had been covering the subsidy costs from its own cash flow since the government had not reimbursed the company. He noted, “Since the provision of N6 trillion in 2022 and N3.7 trillion in 2023, we have not received any payment from the Federation. We’ve continued to support this subsidy from NNPCL’s cash flow, waiting for the government to settle N2.8 trillion.”

A copy of the FAAC meeting minutes obtained by our correspondent revealed that the audit of the N2.7 trillion subsidy claim is in progress. The minutes stated, “The Director, Home Finance informed members that the forensic audit of NNPCL is ongoing, with an update to be provided at the next meeting.”

FAAC members expressed concern over NNPCL’s refusal to comply with the revised exchange rate of N693.50/$1 in converting federation revenue. They noted that NNPCL had not adhered to the revised May 2023 Central Bank of Nigeria (CBN) exchange rate from N436.38/$1 to N621.86/$1, and subsequently to N693.50/$1.

The Vice Chairman of the Post-Mortem Sub-committee warned, “If NNPCL continues to disregard the agreed rate without presenting any authority, FAAC will have to take appropriate action to recover Federation funds.”

The minutes also noted, “NNPCL was directed to comply with the revised exchange rate and re-compute all Royalties, Taxes, and other revenue items for May 2023. NNPCL’s proposed review indicated a refund of N16,829,747,742.96 to the Federation Account.”

The Sub-committee reported that the exchange rate differential for June to December 2023 was N937,961,442,969.83, contrary to NNPCL’s claim of N1,675,920,811,819. They emphasized that only legally backed exchange rates are recognized and requested NNPCL to provide authorization for the use of a weighted average exchange rate for PMS Dollar payments.

The Oyo State Commissioner for Finance, Akinola Ojo, proposed that NNPCL should refund the money if a resolution is not reached by next month.

Efforts are ongoing to resolve these issues amicably, with hopes that NNPCL will comply with the necessary regulations and agreements.


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