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World Bank Reports: NNPC Ltd Missed $1 Billion Revenue Target in 2024

Lagos — The World Bank has disclosed that the Nigerian National Petroleum Company Limited, NNPCL, handed over only half of the income resulting from the elimination of thePremium Motor Spirit subsidy into the nation’s Federation Account.

The World Bank revealed this information in their most recent Nigeria Development Update, which was published on Monday.

Out of the ₦1.1 trillion revenue generated from oil sales and other incomes in 2024, the NNPCL transferred only ₦600 billion, resulting in an unexplained shortfall of ₦500 billion.

The document entitled "Creating Impetus for Equitable Expansion" revealed that the NNPCL utilized the leftover funds to clear its outstanding debts.

According to the World Bank report, the NNPCL postponed transferring the related revenue surplus and began making payments into the Federation Account three months later, starting from January 2025.

The World Bank disclosed that the NNPCL has since been remitting only half of the proceeds, with the remainder reportedly used to offset legacy arrears.

According to The World Bank, the Federal Government expects their revenues for 2025 to come mainly from oil at 70 percent, with the remaining 30 percent coming from non-oil sources, provided that all financial savings from eliminating PMS subsidies are fully transferred.

The financial forecast continues to be guardedly positive yet depends on effectively consolidating recent progress. Firstly, it is crucial to guarantee that all revenue benefits resulting from the elimination of the PMS subsidy—which is projected to amount to 2.6 percent of GDP in 2024—are channeled to the Federation.

"Although the subsidy was completely eliminated in October 2024, NNPCL began transferring the resulting revenue increases to the Federation just starting from January 2025. Ever since, they have been sending only half of these additional funds, with the remainder used to cover previous debts," according to the World Bank statement.

The decrease was blamed on the continuous implicit subsidy scheme that lasted up until the third quarter of 2024, according to the World Bank.

Although other foreign currency-generated income streams like oil royalties, taxes, and custom duties showed substantial gains, the report highlighted that NNPCL was the primary underperformer when it came to transferring funds to the Federation Account Allocation Committee.

Nonetheless, NNPCL stood out as the sole underperformer, contributing merely ₦0.6 trillion to FAAC in 2024, compared to ₦1.1 trillion in 2023, primarily because of the ongoing PMS subsidy. This subsidy persisted up till the end of September 2024. Even though the subsidy was completely eliminated on October 1, 2024, NNPCL didn’t begin channeling these newfound revenues to the Federation until January 2025. Starting then, they sent 50 percent, reserving the remaining portion for clearing previous debts.

By February 2025, the bank reported that NNPCL asserted arrears amounted to N7.8tn, whereas the Federation's assertions reached N6.1tn, resulting in outstanding net arrears of N1.7tn due to the country's main oil firm.

Despite a significant increase in total earnings for Nigeria's key income-producing bodies—from ₦16.5 trillion in 2023 to ₦29.5 trillion in 2024—NNPCL’s contribution dropped to ₦600 billion in 2024, down from ₦1.1 trillion the prior year.

To improve financial management, the World Bank suggested conducting a detailed financial review of NNPCL’s accounts and implementing standardized reporting forms for FAAC.

This demand included better openness in tracking oil revenues and more robust systems for managing public finances.

The World Bank cautioned that if all savings from subsidies are not directed towards the Federation Account, Nigeria’s attempts at fiscal consolidation could be compromised, potentially restricting the government’s capacity to fund infrastructure projects and social programs.

The report emphasized that addressing outstanding debts and guaranteeing complete transfer of subsidy savings are essential for sustaining financial stability.

The financial forecast is cautiously positive but depends on effectively consolidating recent progress.

It is crucial to guarantee that all revenue savings resulting from the elimination of the PMS subsidy—which are projected to be around 2.6 percent of GDP in 2024—are channeled into the Federation.

Addressing all outstanding net arrears and ensuring that the complete advantages of subsidy reform are passed on to the Federation is essential for proper financial management.

Enhance public financial management. Low revenues continue to limit developmental expenditures. Guarantee that the increased revenues from eliminating the PMS subsidy contribute to the Federation’s funds.

Provided by SyndiGate Media Inc. Syndigate.info ).
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