The Federal Government has begun the proposed audit of the N2.7 trillion fuel subsidy claim by the Nigerian National Petroleum Company Limited, NNPCL.
The government stated that it had approved the Office of the Auditor General of the Federation’s engagement to verify the claims made by the corporation regarding the amount the government owes the oil firm.
His process was confirmed by the Director, Home Finance, Ali Mohammed, during the April 2024 Federal Account Allocation Committee meeting.
An audit firm, KPMG, had conducted an initial audit, reducing the claims from N6tn to N2.7tn.
The administration promised to deliver a status report on the matter at the FAAC meeting in May.
It was reported last month that the audit would span from 2015 to 2021, aiming to verify the authenticity of NNPC/Federation Account claims on the N2.7tn while considering hiring an external audit firm.
On May 30, 2023, the NNPCL Group Chief Executive Officer, Mele Kyari, informed State House correspondents that the federal government still owed the company the amount of N2.8 trillion that was spent on fuel subsidies, just hours after President Bola Tinubu declared that the subsidy was no longer available.
While acknowledging that the NNPCL covered the cost of the petrol subsidy from its cash flow, Kyari said the government has not been able to return the N2.8 trillion yet.
While acknowledging that the NNPCL covered the cost of the petrol subsidy from its cash flow, Kyari said the government has not been able to return the N2.8 trillion yet.
He said, “Since the provision of the N6tn in 2022 and the N3.7tn in 2023, we have not received any payment whatsoever from the Federation.
“That means they (the Federal Government) are unable to pay, and we’ve continued to support this subsidy from the cash flow of the NNPC. We are waiting for them to settle up to N2.8tn of NNPC’s cash flow from the subsidy regime, and we can’t continue to build this.”
The committee members also expressed dissatisfaction with the NNPCL’s reluctance to convert federation funds at the amended exchange rate of N693.50/$1.
They claim that NNPCL has refused to follow the CBN’s instructions to modify the Central Bank of Nigeria’s exchange rate from N436.38/$1 to N621.86/$1 in May 2023 and then to N693.50/$1 after that.
The committee members also expressed dissatisfaction with the NNPCL’s reluctance to convert federation funds at the amended exchange rate of N693.50/$1.
They claim that NNPCL has refused to follow the CBN’s instructions to modify the Central Bank of Nigeria’s exchange rate from N436.38/$1 to N621.86/$1 in May 2023 and then to N693.50/$1 after that.
The Vice Chairman of the Post-Mortem Subcommittee issued a warning to NNPC Ltd. regarding their refusal to convert Federation revenue at the revised exchange rate of N693.50/$1.
The warning stated that “If NNPC Ltd. continues to disregard the use of the agreed rate without presenting any authority to that effect, FAAC will be left with no option but to take appropriate action to recover the Federation funds.”
The minute further read, “At the last meeting of FAAC, it was reported that there was a review of the May 2023 CBN exchange rate from N436.38/$1 to N621.86/$1 and a further review to N693.50/$1 in line with the directive of CBN. NNPCL was directed to comply with the revised exchange rate of N693.50/$1 and re-compute all the royalties, taxes, and other revenue items for May 2023 and revert.”
The official reported to the meeting that NNPCL had objected at the subcommittee meeting in April 2024 that the proposed review would cause the business to refund N16,829,747,742.96 to the Federation Account.
He ended by saying that although NNPCL used the exchange rate to pay for the subsidy claim, the subcommittee had anticipated that the Federation Account would receive a reimbursement for the full amount.
He suggested that the FAAC make the decision in this case. He remembered that the subcommittee had reported on the impact of the “weighted average rate” on PMS computation and had found that, in contrast to the NNPCL’s claim of N1,675,920,811,819, the exchange rate differential for the period of June to December 2023 was N937,961,442,969.83.
