The Nigerian National Petroleum Company (NNPC) Ltd has clarified that it is currently selling petrol (Premium Motor Spirit, PMS) at half of its actual landing cost, which NNPC’s Chief Financial Officer, Umar Ajiya, emphasized is not a traditional subsidy.
Speaking in Abuja on Monday, Ajiya explained that while the official pump price of petrol is around ₦600 per litre, the true landing cost is closer to ₦1,200 per litre.
NNPC has been covering this “shortfall” and has spent ₦7.8 trillion in the first seven months of 2024 to manage the difference between the landing cost and the selling price.
Ajiya further clarified that no payments have been made to marketers in the past eight to nine months under the guise of a subsidy.
Instead, the arrangement involves reconciling the difference between the landing cost and the pump price with the Federation, and sometimes the government provides funds to cover this shortfall.
Despite internal communications between NNPC and the presidency referring to this shortfall as a “subsidy,” Ajiya denied that NNPC is engaged in traditional subsidizing practices during a media briefing on the company’s 2023 audited financial statements.
The government seems to be avoiding the term “subsidy” due to its negative associations, especially given that the “subsidy scam” was a key issue during the All Progressives Congress (APC) campaign to unseat the Peoples Democratic Party (PDP) in 2015.