The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mele Kyari, has disclosed that the Federal Government currently owes the corporation N2.8 trillion ($7.4 billion) in subsidy payments.
Kyari made this known during a virtual meeting organised by the Nigerian Senate Committee on Petroleum downstream on Thursday, July 15, 2021. He stated that the NNPC had a responsibility to ensure adequate supply of petroleum products in the country, but subsidy payments were not forthcoming from the government.
“We inherited a huge and unprecedented legacy debts in the sum of N170.6 billion ($450 million) arising from the non-payment of subsidy for the year 2019 and its accrued interest,” Kyari said.
“As at June 2021, the outstanding subsidy payments to the corporation is N2.8tn…. This was mainly due to the difference between the actual market price of Premium Motor Spirit (PMS) and the N145 per litre approved pump price.”
Kyari also stated that the NNPC had resorted to borrowing to keep the country supplied with petroleum products, a situation he described as unsustainable.
“We want to compete and we have the potential to compete but we can’t do this because of the burden on us as a result of the non-payment of salaries, taxes and others,” he said.
The subsidy policy has long been a controversial issue in Nigeria, with some experts arguing that it is not sustainable in the long-term. Despite this, successive governments have continued to subsidise petroleum products, which has placed a heavy burden on the country’s finances.
Kyari’s disclosure of the N2.8tn debt owed to the NNPC adds to concerns about the sustainability of the subsidy policy. Although the government has recently introduced measures to deregulate the downstream sector of the oil industry, including the removal of the price cap on PMS, questions remain about the future of the subsidy policy.
