Tinubu approves diversion of NNPC dividends to fund fuel subsidy that is gone…suspends 2024 payments

In a significant move, President Bola Tinubu has authorized the Nigerian National Petroleum Company (NNPC) Limited to utilize the 2023 final dividends owed to the federation to offset the costs of petrol subsidies. Additionally, the president has approved the suspension of 2024 interim dividend payments to the federation, aiming to enhance NNPC’s cash flow.

This development comes as NNPC faces challenges in paying taxes and royalties into the federation account due to subsidy payments, resulting in a “subsidy shortfall/FX differential.” According to an NNPC forecast, the total petrol subsidy expenses from August 2023 to December 2024 will reach N6.884 trillion, leaving the company unable to remit N3.987 trillion in taxes and royalties to the federation account.

While the exact amount of dividends to be withheld or put on hold remains uncertain, this decision underscores the government’s efforts to navigate the complexities of petrol subsidy payments and ensure the financial stability of NNPC. By diverting dividends to fund subsidies, the administration aims to mitigate the financial burden on the company and maintain a steady fuel supply. However, the long-term implications of this move on the federation account and the country’s finances remain to be seen.