The Nigerian government has officially confirmed plans to pay a ₦7.74 trillion debt to the Nigerian National Petroleum Company Limited (NNPCL), a debt that accumulated as a result of the fuel subsidy policy and exchange rate differentials on the importation of petrol. The debt, which spans from June 2023 to September 2024, comes after the country implemented a full deregulation of the downstream oil sector, which had been a longstanding component of Nigeria’s fuel pricing structure.
The fuel subsidy debt was revealed in a document presented by NNPCL to the Federation Account Allocation Committee (FAAC) during its February 2024 meeting in Abuja. This document outlines the government’s plan to clear the outstanding subsidy within 210 days. However, questions about the long-term economic impact of such a significant payout remain as inflation and the cost of living continue to rise in the country.
The ₦7.74 trillion debt represents the government’s commitment to settle the amount owed to NNPCL for fuel subsidies covering the period from June 2023 to September 2024. The debt, which originated from exchange rate differentials during petrol imports, was gradually accrued over the year.
In June 2023, the debt stood at ₦1.402 trillion, increasing each month. By the end of September 2024, it had risen to ₦7.74 trillion. A detailed breakdown of the debt shows the steady climb in amounts: from ₦1.402 trillion in June 2023, ₦1.48 trillion in July, to ₦1.81 trillion by October. The debt then sharply increased in 2024, with a significant jump to ₦4.68 trillion in March and ₦6.97 trillion by June. The final amount, ₦7.74 trillion, will be the government’s liability by the end of September 2024.
The overall subsidy debt figure, originally standing at ₦10.499 trillion, was reduced by ₦2.756 trillion between November 2023 and September 2024, after a partial settlement. This remaining balance of ₦7.74 trillion represents about 14.07% of Nigeria’s total national budget for 2025, estimated at ₦54.99 trillion.
The debt accumulated due to what is called an “exchange rate differential.” This occurs when the value of the naira falls against the dollar, making it more expensive for NNPCL to import petrol. In this case, the government intervened by covering the difference between the official exchange rate and the actual exchange rate used by NNPCL to import petrol. As a result, the government ended up bearing the financial burden of rising importation costs, which led to the mounting fuel subsidy debt.
This move followed President Bola Tinubu’s controversial statement in May 2023, which declared that the fuel subsidy would be removed. However, while many believed that the subsidy was completely phased out, reports from both the International Monetary Fund (IMF) and the World Bank suggest that the subsidy was, in fact, quietly reinstated through price stabilization measures. These measures aimed to keep fuel prices stable despite the deregulation of the oil sector.
The Nigerian government’s plan to settle the ₦7.74 trillion debt has not been without controversy. Critics argue that the amount is a significant burden on the country’s already overstretched finances. Many Nigerians have expressed concerns about how the government plans to finance the payment, especially given the country’s persistent inflation and rising costs of living.
Additionally, there have been growing concerns about the transparency of NNPCL’s financial reporting. Tunde Aregbesola, the Ogun State Accountant-General, highlighted a significant drop in revenue remitted by NNPCL in comparison to previous months, pointing to an outstanding balance of ₦10.8 trillion in receivables. This has raised further questions about the company’s financial practices, especially considering that NNPCL is a state-owned entity.
Members of the Federation Account Allocation Committee (FAAC), the body responsible for overseeing the allocation of federal funds, have raised concerns about the figures provided by NNPCL. FAAC Chairperson Oluwatoyin Madein assured the public that an alignment committee is currently reviewing NNPCL’s revenue reporting figures to ensure proper reconciliation. This review aims to clarify the discrepancies and ensure that there is no misreporting or mismanagement of funds.
The government has committed to clearing the ₦7.74 trillion subsidy debt within 210 days, but this will depend on the financial and fiscal strategies the government puts in place. The payment plan has sparked further debate on whether such a large payment is sustainable and how it will affect Nigeria’s broader economic policies.
The ongoing fuel subsidy debate raises serious questions about Nigeria’s economic future. Despite the government’s intention to clear the debt, many experts warn that the fuel subsidy issue may recur unless Nigeria adopts more sustainable measures to address its fuel import dependency and the underlying issues with the exchange rate.
