President Bola Tinubu has approved a strategic plan allowing the Nigerian National Petroleum Company (NNPC) Limited to use its 2023 final dividends to offset the mounting costs of petrol subsidies. This move is aimed at easing the financial strain on NNPC, which has been grappling with the growing expenses tied to these subsidies.
NNPC has projected that petrol subsidy costs from August 2023 to December 2024 could soar to N6.884 trillion. This staggering figure threatens to leave the company unable to fulfill its obligation to remit N3.987 trillion in taxes and royalties to the federation account, as required by the Petroleum Industry Act (PIA).
In response to this looming challenge, President Tinubu has also instructed NNPC to halt the payment of interim dividends to the federal government for 2024. This pause is intended to improve NNPC’s cash flow, helping the company remain financially stable during this period.
NNPC had previously alerted President Tinubu in June 2024 about the growing pressures from subsidy payments, which were threatening its ability to continue importing petrol. The combination of rising subsidy costs and foreign exchange challenges had placed the company in a precarious position.
To navigate these financial difficulties, NNPC will suspend interim dividend payments from May to December 2024. Typically, these payments are made monthly to the federation account and shared among the three levels of government, while final dividends are distributed annually after financial reconciliation.
This decision highlights the government’s proactive approach to ensuring NNPC’s ongoing viability. By redirecting the 2023 final dividends and temporarily halting interim payments, the company can better manage its subsidy-related expenses and continue playing a vital role in Nigeria’s petroleum sector.