WORLD BANK QUERIES NNPCL’S REMITTANCE OF SUBSIDY PROCEEDS

WORLD BANK QUERIES NNPCL’S REMITTANCE OF SUBSIDY PROCEEDS

The World Bank on Monday queried the remittance of the proceeds of the petrol subsidy removal by the Nigerian National Petroleum Company Limited (NNPCL).

At his inauguration on May 29, 2023, President Bola Ahmed Tinubu announced the removal of petrol subsidy; the policy triggered a hike in price of the product and virtually all goods and services across the nation.

The policy was projected to save the federal government billions of dollars annually.

The petrol subsidy removal, as justified by the government, was expected to free up funds for critical infrastructure and social programmes.

But the World Bank noted on Monday that while the subsidy was fully removed in October 2024; the NNPCL did not begin transfer of the gains to the federation account until January 2025.

It also stated that since then, the national oil company has been remitting only 50 per cent of the subsidy proceeds and using the rest to offset “past arrears.”

An insider at the NNPCL, who does not want to named, said the declaration by the World Bank and some officials of the government was not strange to them.

“The truth is that Nigeria has been entrapped in these loans for nearly three decades and considering that subsidy has been removed, and in principle the government is getting more money, it is time to pay debts,” he said.

“Nigeria has a lot of commitments with the multinationals and it is repaying those loans now. It is not a matter of whether what is being paid has been captured in the budget or not because it depends on the agreement.

“Some of the loans came about from production sharing contracts and they were not captured as revenue which under normal circumstances must be remitted to the federation account to pass through the rigours of budgeting and releases.

“Some of the monies are being deducted at source. You should also understand that there is international politics in some of these arrangements and the federal government must abide by them,” he said.

What the World Bank said

Alex Sienaert, World Bank’s lead economist for Nigeria, who stated these in Abuja, yesterday, while presenting the May 2025 Nigeria Development Update (NDU) report, urged the federal government to increase transparency of oil revenues.

The NDU is the World Bank’s regular flagship report on Nigeria. It covers at least every six months, providing a dive into the Nigerian economy, covering recent developments in economic policy and providing perspective on the outlook for the economy going forward.

The current issue of the May 2025 NDU focuses on inclusive growth, especially for the poor and economically insecure.

The NDU report also builds on the last edition in October 2024 that focused on jobs.

“Despite the subsidy being fully removed in October 2024, NNPCL started transferring the revenue gains to the Federation only in January 2025.

“Since then, it has been remitting only 50 per cent of these gains, using the rest to offset past arrears,” the World Bank said in its latest report.

“PMS subsidy was effectively ended last October, but revenue gains from this are yet to fully flow to the federation (account). As of January, NNPCL was still only transferring about half of the resulting revenue gains from the subsidy elimination to the federation,” the World Bank said.

The World Bank noted federal government’s revenues for 2025 were anticipated to be 70 per cent from oil and 30 per cent from non-oil sources, assuming full remittance of the fiscal savings from the PMS subsidy removal.

“However, as of March 2025, this full remittance had not yet occurred, as NNPCL claims it has large PMS-related subsidies that should be settled first,” World Bank said.

It urged the government to sustain the ongoing reforms, including the removal of foreign exchange (FX) controls, and undertake more reforms to further improve macroeconomic and fiscal environment, that is critical for economic stability.

“Eliminating the PMS subsidy and eliminating the FX subsidy have really been critical reasons why the fiscal situation has improved so dramatically. But of course, there’s still a range of fiscal policy and fiscal management issues where more can be done to safeguard the gains that have already been achieved

Sienaert commended the impact of reforms initiated so far, reporting that Nigeria had witnessed a notable acceleration in economic activity as GDP growth in 2023 reached its fastest pace since 2015, while the FX reforms helped achieve a more unified and stable exchange rate.

He said foreign reserves also rose from a low of $32 billion to over $37 billion, with net reserves showing significant improvement.

“The bottom line is a 4.5% of GDP increase in total revenues in 2024, which is not something that, as economists, looking across different countries and recovery stories, we see very often,” Sienaert noted.

Cost of living still high

Sienaert noted that despite these improvements in the economy, the cost of living was still high.

According to him, although the federal government has an ambitious targeted cash transfer programme for three months for 15 million recipients, the implementation has been quite slow.

“So, only about a third of those recipients have received transfers so far”, he said.

He added, “In order for the economy to meet the government’s aspiration of achieving a $1 trillion economy by 2030 and deliver poverty reduction and shared prosperity, the pace of growth needs to accelerate further and its composition rebalanced towards those economic sectors and firms that are most productive, generate positive spillovers, and create jobs and opportunities at scale, especially for the poor and economically insecure.

“At present, the best-performing sectors of the economy, like finance and ICT, are important drivers of growth but are not sources of mass employment as many Nigerians do not yet have the skills and opportunities to participate in them.

“A private sector-led, public sector-facilitated growth strategy can boost inclusive growth. Key elements of this strategy to include addressing major infrastructure gaps, such as in electricity and transportation; fostering healthy competition, market openness, and improving the business environment to spur business dynamism; improving access to finance for new and existing firms to grow and improve productivity and improving policies in key sectors to help unleash the potential of these sectors.”

He noted that international experience suggests that the public sector cannot sustainably generate growth and jobs by itself.

“Nigeria is no exception, particularly since public resources remain constrained.

“A useful strategy is to position the public sector to play a dual role as a provider of essential public services, especially to build human capital and infrastructure, and as an enabler for the private sector to invest, innovate, and grow the economy,” he said.

Inflation could average at 22% in 2025

The World Bank also predicted that inflation could get to an annual average of just over 22 per cent in 2025 if the Central Bank of Nigeria (CBN) maintains its current tight monetary stance.

Taimur Samad, the World Bank’s Country Director for Nigeria, during his presentation, said: “There is a lot to be positive about on Nigeria. Growth is up. The exchange rate is market reflective and more stable. Foreign reserves have increased.

“The fiscal position is much improved on the back of a surge in federation revenues. Now, needless to say, the war is not won.

“It will be crucial for the CBN to stay the course with tight monetary policy to anchor stability. But if it does so, as we anticipate it will, we expect that inflation will fall to an annual average of just over 22% in 2025. That is a major achievement”, Samad added.

He further highlighted that a key point of the NDU report is the recommendation for Nigerian government to stay the course on tough macro fiscal reforms, and undertake yet more reforms to fire up and drive growth, job creation and share an economic opportunity.

According to Samad, doing this will strengthen macroeconomic foundation as a launching pad to build on an economy that is conducive for the private sector to grow and generate more productive jobs for Nigerians.

Samad stressed that the NDU is more than just a report. “It is a tool for collective reflection and action”, he said.

Our plan is to improve macroeconomic stability – Edun

In his presentation, the Minister of Finance and Coordinating Minister for the economy, Olawale Edun, said what the government was doing now was to ensure macro-economic stability.

“But in doing that, there is still a need to push for transparency and fiscal data in oil sector.

“We had a meeting with Revenue generation agencies and other key government officials to clarify the type of data we will be putting out so that it is consistent.

“Next is to ensure high quality jobs to lift Nigerians out of poverty. We have the National Development Plan to boost growth and ensure macro-economic stability in the medium term,” the minister stated.

House cleaning needed to ensure transparency – Expert

An economist and oil and gas, Dr Marcel Okeke, in an interview with our reporter yesterday, said that the revelation on the NNPCL by the World Bank justified the recent change in the leadership of the national oil company.

“The president must have noticed some of what the World Bank is now revealing and that led to the sudden change of leadership in the NNPCL and even the topmost leadership has also gone ahead to continue the reform.

“That goes to say that from the World Bank’s revelation, there is a lot of job for the new leadership to do in terms of house cleaning and ensure transparency going forward,” the expert stated.

Also speaking to Daily Trust, the Executive of the Centre for Fiscal Transparency and Public Integrity (CeFPTI), Umar Yakubu, alleged that the opacity in the operations of the NNPCL had led to the accumulation of huge debt in the petroleum sector.

According to him, there is a need for forensic audit of those debts.

“The amount of NNPCL’s debt has skyrocketed to trillions of Naira which is billions of dollars.

“When subsidy was removed due to lack of transparency and inefficiency, importation of fuel was already in the books for government which took them almost two years to offset, so they finally decided to start remitting.

“It still boils down to the lack of transparency and opacity in the oil and gas industry. There is no country in the world that cannot accurately give you a figure of how much its crude oil sales has amounted to.

“This is because there are allegations that some oil blocs are not adequately documented. We also have the highest rate of oil theft. It is unfortunate that we are paying debt of what we don’t even have the date on. The petrol could have even been smuggled.

“Luckily, the subsidy has gone and they ought to have audited all the past debts they said they are owing companies importing fuel. Therefore, there should be forensic audit to ensure transparency going forward,” Yakubu said.

Nigeria spent N13trn on fuel subsidy in 15 years – NEITI

A report from the Nigeria Extractive Industries Transparency Initiative (NEITI) had stated that the sum of N13.7 trillion ($74.386 billion) was spent on the payment of fuel subsidy between 2005 and 2020,

According to the report, the subsidy payments in 2005 stood at N351 billion ($2.66 billion), N219.72 billion ($1.70 billion) in 2006, N236.64 billion (1.89 billion) in 2007, N360.18 billion (3.03 billion) in 2008, N198.11 billion ($1.60 billion) in 2009 and N416.45 billion ($2.76 billion) in 2010.

The report had also showed that subsidy payments for 2011 stood at N1.9 trillion ($12.18 billion), N690 billion ($4.34 billion) in 2012, N495 billion ($3.11 billion) in 2013, N482 billion ($2.92 billion) in 2014, N316.70 billion ($1.62 billion) in 2015, N99 billion ($0.39 billion) in 2016, N141.63 billion ($0.44 million) in 2017, N722.30 billion ($2.36 billion) in 2018, N578.07 billion ($1.88 billion) in 2019 and 134 billion ($0.37 billion) in 2020, respectively.

Background

President Bola Tinubu in his inauguration speech on May 29, 2023, said petrol subsidy was gone.

That was after reports had shown that former President Muhammadu Buhari spent N10.7 trillion on petrol subsidies between 2016 and the first six months of 2023.

Additionally, Mele Kyari, Group Chief Executive Officer of the NNPC, had revealed that the country was spending more than N400 billion monthly on fuel subsidy.

He added that the benefits of the fuel subsidy regime were enjoyed by members of a cabal rather than the masses that it was targeted at. Kyari had explained that the subsidy was removed because it was characterised by fraudulent activities.

He had said the fuel subsidy was not beneficial to the masses who are the original target beneficiaries, therefore the federal government removed it with a plan to reinvest on projects that would have a direct impact on the masses.

“The crude oil is a global commodity and its price is not hidden, everyone can calculate and know how much is the cost of every final product from the crude at the international market. But, since the inception of oil importation, the government has been paying subsidy on petrol to make it cheaper for Nigerians to buy below the cost price.

“This subsidy is designed to assist Nigerians. That is the intention. But in reality, the masses are not the beneficiaries. First, the masses are not the owners of the exotic cars, buying fuel, owning the filling stations, and doing the oil business.

“This subsidy that the government has been paying over the years is the root of all the atrocities and fraud committed in this country,” Kyari had said.