As the monthly allocations shared by federal, state and local government in Nigeria skyrocket due to the announced end of subsidy regime, the Nigerian National Petroleum Company Limited (NNPCL) takes the bullet and carries the financial burden. PLATFORMS AFRICA, in this figures-don’t-lie report, shows how this has become an existential threat to operations of the National Oil Giant.
The debts burden on the Nigerian National Petroleum Company Limited (NNPCL) will cross the $10 billion mark by the second quarter of 2025, barring the adjustment in present Nigerian financial structure, Platforms Africa reports.
The national oil company had, after a long period of silence, on Monday admitted that it was owing importers of Premium Motor Spirit (PMS) $6 billion.
This, transactional documents sighted by Platforms Africa detailing deals between the company and some partners showed that the $6 billion debts would soon be dwarfed as the Nigerian state continues to push the burden of differentials between the landing cost and pump price of the product to the national oil company.
Already, the under-recovery for the last quarter (September to December) of 2024 is expected to push the total spending on differentials above N6 trillion, according to the supplementary budget foŕ the year.
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At current rates, expenditure on fuel subsidy was, according to the initial projection by the ministry of finance, expected to reach 5.4 trillion naira by the end of 2024. “This compares unfavourably with 3.6 trillion naira in 2023 and 2.0 trillion naira in 2022,” the ministry said in the draft document published by Reuters on June 6, 2024.
The “Accelerated Stabilisation and Advancement Plan” (ASAP) was drafted by the finance ministry with private sector executives and some economists to address challenges related to reforms aimed at boosting growth.
Recall that before what Platforms Africa tagged the Eagle Square declaration of ‘subsidy is gone’ by President Bola Ahmed Tinubu, and the subsequent continuous payment of under-recovery by the NNPCL, this burden was being shared by the government through its monthly allocations.
While the debts incurred by the company, due to this arrangement mount to $6 billion, the allocations being shared monthly by states continue to skyrocket.
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A document of the FAAC showed that in the year 2023 alone, the states shared a whooping N3.3 trillion, an increase buoyed by the declared end of subsidy regime from May 29 of the year.
According to figures obtained from the 2024 approved budget, states are projected to even receive N2.24tn more than the N3.3tn disbursed in 2023.
The bulk of the revenue shared at FAAC meetings by the federal, state, and local governments are earnings majorly from oil exports, taxes, and other statutory allocations.
Under the current revenue-sharing formula, the federal government gets 52.68 per cent of the revenue, states 26.72 per cent, and local governments 20.60 per cent.
A breakdown of projected revenue showed that Lagos State will get the highest revenue of N596.63bn, followed by Delta and Akwa Ibom with N564.29bn and N510.02bn respectively.
Other states such as Adamawa will get N141.62bn, Anambra (199.52bn), Bauchi (196.12bn), Benue (120bn), Borno (201.87bn), Ebonyi (N108.32bn), Edo (N185.35bn), Ekiti (N81.85bn), Gombe (N99.6bn), Enugu (N120bn), Imo (N136bn), Jigawa (N107.5bn), Kogi (N138.17bn), Kwara (N125.45bn), Nasarawa (N96.95bn), Niger (N236.9bn).
Also, the document indicated that Kaduna would get a revenue injection of N84.39bn, Katsina will get N148.06bn while Kebbi will receive N145.02bn.
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Other states include Ondo (N45.36bn), Osun (N99.09bn), Oyo (N201.27bn), Taraba (N112bn), Plateau (N151.42bn), Sokoto (N108bn) Yobe (N87.94bn) and Zamfara (N107.93bn).
Record-Breaking N3 3 Trillion Net Profit Proves NNPCL To Be Bullish
NNPC Limited releases FY2023 Results with Record-Breaking N3.3trillion in Net Profits and revenues of N27.99trillion
Amidst the financial burden, the company proved to be one of the better managed firm as it achieved a remarkable milestone by reporting a record-breaking net profit of N3.3 trillion for the 2023 financial year, marking a substantial 27.6% increase from the N2.58 trillion in the corresponding period of 2022.
This would be the highest profits ever declared in NNPC Limited’s history, and since it transitioned to a profit-making entity in 2020 after the enactment of the PIA into law.
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This monumental achievement was unveiled at the company’s Annual General Meeting, emphasising NNPC Limited’s exceptional financial success and strategic growth, which significantly contributes to the expansion of Nigeria’s energy sector.
Mele Kyari, NNPC’s GCEO, confidently remarked that NNPC’s sustained profitability reflects a corporation that is not merely surviving but thriving, demonstrating robust outcomes that underscore NNPCL’s operational efficiency and strategic foresight.
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In his comments on the results, Umar Ajiya Isa, Executive Vice President and Chief Financial Officer of NNPCL, emphasised NNPCL’s exceptional performance in the 2023 Financial Year.
According to him, NNPC Limited achieved a remarkable ₦23.99 trillion in revenue, showcasing its robust market position and operational efficiency. With a gross profit of ₦7.04 trillion and an operating profit of ₦4.34 trillion, NNPCL achieved a net profit of ₦3.3 trillion at the end of 2023.
These impressive results signify a solid net profit margin of 14% and an operating profit margin of 18%, demonstrating the company’s adeptness at converting revenue into substantial profits. In addition, NNPC Limited’s 2023 financial results showcased a 12% return on equity (ROE) as of FY2023 and maintained a current ratio of 1:1, reflecting a balanced approach to asset and liability management.
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Notably, the company’s debt-to-assets ratio stood at a mere 1.8%, highlighting prudent financial management and a robust balance sheet.
States crave for more
Despite this improved funding, no fewer than 32 states have indicated plans to borrow N2.78tn from domestic and external institutions to fund their 2024 budget.
The states, according to an analysis of their 2024 approved budget sourced from Open Nigerian States, a budgIT-backed website that serves as a repository of government budget data, plan to fund their budget deficit by borrowing from domestic financial institutions and external financiers.
Last year, governors got the most FAAC allocations in at least seven years after the petrol subsidy removal and currency reform reportedly delivered a 40 percent boost to income.
Who got what in 2023
An analysis of the 2023 FAAC monthly allocation revealed that the sub-national and LGs got the highest allocation of N627.73bn in September, followed by N610.5bn in December, N555.75bn in August, N533bn in November, N514bn in July and N497.97bn in October.
Oil-producing states receive an additional 13 percent derivation fund, creating disparities in allocations — only nine (Abia, Akwa-Ibom, Bayelsa, Delta, Edo, Imo, Ondo, and Rivers) of the 36 states enjoyed this benefit in 2023.
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Interestingly, four of these nine states also ranked among the top ten highest FAAC recipients in 2023.
Delta state received the highest FAAC allocation in the review period, receiving N483.57 billion. Rivers and Akwa Ibom followed closely behind, pocketing N426.84 billion and N380.1 billion, respectively.
Lagos, Bayelsa, and Kano also featured prominently, securing N371.39 billion, N268.34 billion, and N261.37 billion, respectively.
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Conversely, Gombe state got the lowest allocation, receiving N99.05 billion, followed by Ebonyi with N107.45 billion and Ekiti received N107.5 billion.
Among geopolitical zones, south-south, emerged as the top recipient, raking in a hefty N1.84 trillion, followed by north-west and south-west with N1.20 trillion and N1.10 trillion respectively.
Further down the ladder north-central received N948.24 billion, north-east N807.30 billion and south-east N680.59 billion.
Pump Price Adjustment
Amid a lingering fuel scarcity and crisis, the Nigerian National Petroleum Company (NNPC) has adjusted the fuel price from N650 to between N855 and N890 per litre, Platforms Africa reports.
Without waiting for their stock to finish as they claimed during price reduction, other marketers too and outlets have also adjusted the pump prices with over 30 per cent increments.
This came 24 hours after an exclusive news by Platforms Africa revealed a hike in the ex-depot price of the product to N754 per litre.
The increments were discovered on Tuesday at dispensing machines of government-backed NNPCL stations in Lagos and Abuja.
Meanwhile, other private owned stations adjusted their price to as much as N1,100 per litre.
As gathered, the price has been reviewed upward to reflect the global price and reduce the debt burden on NNPC.
Team Lead of Platforms Africa, Adeola Yusuf, an oil and gas policy analyst, has, in a reaction to this development, said that the adjustment would not only further impoverish Nigerians but it would also not help the NNPCL out of its financial quagmire if the present arrangement is allowed to continue.
Speaking on TVC Breakfast show on Tuesday, Adeola Yusuf said that while it is a general practice for businesses to be indebted through access to loan facilities and others, it becomes a threat if that trajectory becomes a tradition.
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“The price adjustment may be a relief for the NNPCL but it is temporary. What happens again if there is an increase in the production cost? The real issue of allowing the company to operate without bearing the financial burden should be on the front burner.
NNPCL should be saved of this existential threat to its operations through the Intial Public Offering (IPO). This, which is contained in the Petroleum Industry Act (PIA), should be the focus of advocacy by all and sundry,” he concluded.
Platforms Africa.
