More than three years after the federal government declared the removal of the fuel subsidy, a renewed debate has emerged over Nigeria's fiscal transparency. Financial experts and economists are questioning whether the subsidy truly ended or simply transformed into an off-budget mechanism. 

The renewed discourse follows an extensive analysis by Mr. Dele Oye, Chairman of the Alliance for Economic Research and Ethics Ltd/GTE and former National President of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA). Citing NNPCL’s 2024 audited financial statements, the Petroleum Industry Act (PIA), and World Bank reports, Oye contends that a substantial portion of the Nigerian National Petroleum Company Limited’s (NNPCL) N17.512 trillion receivable from the Federation functions as an implicit fuel subsidy.

Breaking Down the N17.5 Trillion Receivable

Oye clarified that the massive N17.512 trillion figure comprises two primary components:

• Energy Security Costs: N8.672 trillion.

• Other Federation Receivables: N8.840 trillion, which includes various advances and expenditures incurred on behalf of the government.

He cautioned against double-counting, noting that the frequently cited N7.311 trillion in 2024 energy security costs is already factored into the closing balance. According to NNPCL’s audited statements, these costs stemmed largely from exchange rate differentials between the pricing of imported Premium Motor Spirit (PMS) and the prevailing foreign exchange rates at the time of final settlement.

Oye argued that because consumers did not immediately bear the full market cost of imported fuel, the resulting economic losses were absorbed by the Federation through NNPCL's deductions and receivables—matching the economic characteristics of a subsidy. He noted that World Bank findings similarly classified the arrangement as an implicit PMS subsidy before it reportedly concluded in October 2024, when NNPCL aligned with official exchange rates for fiscal revenues.

Legal and Constitutional Questions

Beyond the accounting and economic impact, Oye highlighted potential legal ambiguities surrounding the deductions. While NNPCL has cited Section 64(m) of the PIA—which empowers the company to act as a supplier of last resort for energy security—he pointed out that Section 317(6) limited transitional price interventions to a maximum of six months from the enactment of the law.

This temporal restriction raises questions regarding whether subsequent cost recoveries were lawfully authorized through executive directives, legislative appropriations, or other statutory frameworks. Furthermore, he noted that these practices warrant a careful review against constitutional provisions governing the collection, custody, and distribution of public revenue.

Impact on Public Finances and FAAC Revenues

The continuous deductions prior to NNPCL revenue remittances directly reduce the pool of funds shared among the federal, state, and local governments via the Federation Accounts Allocation Committee (FAAC).

World Bank data indicates that despite rising gross oil revenues in 2024, actual petroleum revenue remittances declined due to these ongoing deductions. Analysts warn that this dynamic diminishes critical funding available for infrastructure, healthcare, education, and security, while simultaneously obscuring the nation’s true petroleum earnings.

Proposed Solutions and Reforms

To restore transparency and public confidence in petroleum revenue management, Oye has put forward several key recommendations:

• Comprehensive Forensic Audit: A joint, independent forensic audit by the Federal Ministry of Finance, the Office of the Accountant-General of the Federation, and NNPCL to reconcile all energy security costs, disputed balances, and deductions.

• Enhanced Public Disclosure: Monthly reporting detailing gross revenues, specific deductions, remittances, and actual FAAC disbursements.

• Strict Legislative Oversight: Ensuring that any future price-support interventions are subjected to explicit legislative appropriation rather than off-budget arrangements.

• Domestic Refining Implementation: Full execution of domestic crude supply obligations under Section 109 of the PIA to reduce dependence on costly imported petroleum products.