By Milcah Tanimu
The Nigerian National Petroleum Company (NNPC) Ltd has clarified its position regarding the current petrol pricing, stating that while it sells petrol at half of its landing cost, this should not be classified as a subsidy.
NNPC’s Chief Financial Officer, Umar Ajiya, addressed the issue in Abuja on Monday, explaining that the company is covering a “shortfall” rather than providing a traditional subsidy. According to Ajiya, although the official pump price of petrol is approximately ₦600 per litre, the actual landing cost is closer to ₦1,200 per litre.
Ajiya revealed that NNPC has spent ₦7.8 trillion in the first seven months of 2024 to cover this shortfall. He emphasized that this situation differs from a typical subsidy, which usually involves selling a product below cost price.
Despite internal documents from NNPC and the presidency referring to the shortfall as a “subsidy,” Ajiya was adamant that NNPC is not subsidizing petrol. Instead, he stated that the company is managing the difference between the landing cost and the selling price in coordination with the Federation.
Ajiya also confirmed that no payments have been made to marketers as part of a subsidy scheme in the past eight to nine months. He explained, “In the last eight to nine months, NNPC Ltd. has not paid anybody a dime as a subsidy; no one has been paid kobo by NNPC Ltd. in the name of subsidy.”
The company has been importing petrol at a specific cost price and is instructed to sell it at half the price, resulting in the shortfall that is managed between NNPC and the Federation. There have been no monetary transactions with marketers under the guise of a subsidy.
It is noted that Ajiya did not address how much of the $4.9 billion covering the shortfall might have contributed to the federation account if these payments were not made. Speculation suggests that the All Progressives Congress (APC) government is avoiding the term “subsidy” due to its negative associations, particularly since the “subsidy scam” was a significant issue in its campaign to unseat the Peoples Democratic Party (PDP) in 2015.
