The Federal Government’s debt to the Nigerian National Petroleum Company Limited (NNPCL) for exchange rate differentials on petrol imports has surged to N7.74 trillion as of September 2024. This staggering figure, linked to the deregulation of the downstream oil sector, highlights the financial burden of maintaining stable fuel prices despite rising import costs. The debt, which accumulated between June 2023 and September 2024, underscores the challenges of balancing economic stability with sustainable development.
The NNPCL disclosed this debt in a presentation to the Federation Account Allocation Committee (FAAC) during its February meeting in Abuja. According to the document, the government is working on a 210-day repayment plan to settle the N7.74 trillion obligation. This development raises critical questions about the allocation of national resources and the long-term impact on Nigeria’s economic growth.
The N7.74 trillion debt represents 14.07% of the N54.99 trillion 2025 national budget. Such a significant financial obligation could divert funds from critical sectors like education, healthcare, and infrastructure, which are essential for national development. The debt stems from exchange rate differentials, which occur when the government covers the gap between projected and actual costs of importing petrol. This practice, while aimed at stabilizing fuel prices, has placed a heavy burden on public finances.
A breakdown of the debt shows a steady increase from N1.29 trillion in June 2023 to N7.74 trillion by September 2024. This escalation reflects the volatility of global oil markets and the challenges of managing a deregulated downstream sector. The government’s decision to absorb these costs, rather than passing them on to consumers, has come at a high price, raising concerns about fiscal sustainability.
President Bola Tinubu’s declaration on May 29, 2023, that “subsidy is gone” was intended to signal a new era of economic reform. However, reports suggest that the government quietly reintroduced subsidies to cushion the impact of rising fuel prices. This move, while politically expedient, has undermined efforts to create a more transparent and market-driven energy sector.
The International Monetary Fund (IMF) and the World Bank have repeatedly warned against the reintroduction of fuel subsidies, citing their negative impact on economic growth. In June 2024, a proposed economic stabilization plan revealed that the government planned to spend N5.4 trillion on fuel subsidies, further straining public finances.
Energy expert Wumi Iledare has questioned the rationale behind the NNPCL’s request for repayment, noting that the company sells oil in foreign currency on behalf of the government. He argued that the NNPCL should pay royalties and taxes like other oil companies, making it unclear why the government would need to refund money to the company. “It is very difficult for me to understand why the Federal Government has to return any money to NNPCL,” Iledare stated. He emphasized that the government owns the equity, tax oil, and royalty oil sold by the NNPCL, making the repayment request complex and hard to justify.
Members of the FAAC committee have also raised concerns over inconsistencies in revenue reporting by the NNPCL. Ogun State Accountant-General Tunde Aregbesola highlighted a significant decline in revenue compared to November 2024 inflows and questioned the accuracy of the NNPCL’s figures. FAAC Chairman Oluwatoyin Madein acknowledged these concerns, stating that the reconciliation process involving the NNPCL and the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) was ongoing. She emphasized the need for a clear timeline to conclude the reconciliation, which currently covers up to December 2024.
The N7.74 trillion debt underscores the urgent need for sustainable solutions to Nigeria’s energy challenges. Rather than relying on costly subsidies, the government should prioritize investments in domestic refining capacity, renewable energy, and infrastructure development. These measures would reduce dependence on fuel imports, create jobs, and stimulate economic growth. Additionally, greater transparency and accountability in the management of oil and gas revenues are essential to rebuilding public trust. The government must ensure that resources are allocated efficiently and equitably to support national development goals.
The Federal Government’s N7.74 trillion fuel subsidy debt is a stark reminder of the challenges facing Nigeria’s economy. While the immediate focus is on repaying the debt, the long-term solution lies in implementing sustainable policies that promote economic stability, transparency, and inclusive growth. By addressing these issues, Nigeria can unlock its full potential and pave the way for a brighter future.
