Abuja — The Nigerian National Petroleum Corporation (NNPC) spent N508 billion to subsidise Premium Motor Spirit (PMS), also known as petrol, in 2019.
The NNPC, in its 2019 Audited Financial Statement, disclosed that the amount spent as subsidy, officially listed as under recovery, represented 35.57 per cent of the N1.428 trillion it remitted to the Federation Account Allocation Committee in 2019.
The NNPC explained that N667 billion was approved as defrayed cost for the year 2019, from which the N508 billion was utilized for under recovery; while N32 billion.
The NNPC further stated that the country lost N32 billion to crude oil and petroleum products losses, while N127 billion was utilized as pipeline repairs and management costs, as these funds were deducted from its earnings before remittances were made to the federation account.
The corporation added that it made total cash payment of N1.428 trillion to the Federation Account, noting, however, that amount payable of N776 billion was to be made to the federation account as at December 31, 2019, being proceeds from crude oil lifting from October to December 2019.
The NNPC explained that: “Crude supplies for domestic use represents the cost of crude purchased by the corporation from the federation at the prevailing international market price for local market consumption. When the crude is converted to refined product either through the refineries or Direct Sales Direct Purchase (DSDP), the product (that is Premium Motor Spirit) are usually sold to the local market at a price below the prevailing market price leading to under recovery of our cost.
“These amounts are receivable to the corporation but are defrayed and charged against amount due to FAAC on a monthly basis. Other defrayed costs charged to FAAC include crude and products losses, pipeline and management costs.”
Furthermore, NNPC noted that the COVID-19 pandemic would impact certain areas of its finances, noting, however, that financial impact would not be severe, especially as the corporation operates in the essential class of the economy and still enjoys the privileges of arrangements to draw funds from the escrow account.
It said: “In December 2019, there was a COVID-19 outbreak which has spread globally. The outbreak has been declared a public health emergency of international concerns by the World Health Organisation (WHO) in January 2020.
In the light of these recent developments and its underlying impact, it is expected that the impact of the COVID-19 pandemic will extend towards the following areas of the financial statements: revenue, trade receivables and accounts payable.
Management is confident that the financial impact of the pandemic will not be severe as the group operates in the essential class of the economy and the arrangement to draw from the escrow account has not been withdrawn.”
The NNPC added that management had also considered the potential implications of this outbreak and had put in place measures to mitigate against a significant impairment of the carrying value of assets.
It further stated that there were no plans to liquidate any of its operations or to cease trading in the near future.