Tinubu Gives NNPC Go-Ahead to Use Federation Funds for Petrol Subsidy

Tinubu Approves NNPC’s Plan to Divert Federation Dividends to Fund Petrol Subsidy.

In a move to mitigate the financial strain on the Nigerian National Petroleum Company (NNPC) Limited, President Bola Tinubu has authorized the use of the 2023 final dividends owed to the federation to offset the cost of petrol subsidies, according to The Cable.

The president has also ordered a temporary halt on the payment of 2024 interim dividends to the Federal Government, aiming to bolster NNPC’s cash flow. Internal documents obtained by The Cable reveal that the total petrol subsidy expenses from August 2023 to December 2024 will reach a staggering N6.884 trillion, severely impacting NNPC’s ability to remit N3.987 trillion in taxes and royalties to the federation account.

Under the Petroleum Industry Act (PIA), NNPC is mandated to pay taxes, royalties, and dividends to the federation, its sole shareholder. However, the company warned President Tinubu in June 2024 that the subsidy payments were crippling its cash flow, threatening its viability as a “going concern.” NNPC attributed the ballooning subsidy bill to “forex pressure” and cautioned that it might struggle to sustain petrol imports.

To alleviate the financial burden, NNPC will suspend the payment of interim dividends for eight months, from May to December 2024. Typically, interim dividends are remitted monthly into the federation account and shared among the three tiers of government, while final dividends are paid annually after reconciliation.