Turning the Corner: Time to Move From Reforms to Results,’ the World Bank has raised red flags regarding the transparency of oil revenue earnings by the Nigerian National Petroleum Company Limited (NNPCL) after the removal of fuel subsidies.
While acknowledging visible revenue gains from Nigeria’s exchange rate reforms, the World Bank stressed the necessity for more clarity on oil
revenues. This includes a call for transparency regarding the financial gains of the NNPCL from subsidy removal, the ongoing deduction of subsidy arrears, and the overall impact on Federation revenues.
Former Central Bank of Nigeria governor, Lamido Sanusi, echoed similar concerns a week ago, emphasizing the need for transparency in NNPCL’s revenue reporting.
During a Senate Committee on Finance sitting on Wednesday, Mr Mele Kyari, the Group Chief Executive Officer of NNPCL, asserted that the company had remitted N4.5 trillion to the federation account from January to October 2023.
The fuel subsidy removal, announced by President Bola Ahmed Tinubu’s administration in June 2023, coupled with forex reforms, contributed to an October inflation rate hike to 27.33%.
The World Bank, in its Nigeria Development Update, further suggested that the Federal Government might still be indirectly subsidizing fuel prices, as the current cost of N650 per liter is not reflective of market conditions. According to the bank’s Lead Economist for Nigeria, Alex Sienaert, the cost-reflective price should be around N750 per liter.
“There is a need for more clarity on oil revenues, especially the financial gains of Nigeria National Petroleum Corporation Limited, NNPCL, from the subsidy removal, the subsidy arrears that are still being deducted, and the impact of this on Federation revenues.
“It does seem like petrol prices are not fully adjusting to market conditions so that hints at the partial return of the subsidy, if we estimate what is the cost reflective of retail PMS price of the would-be and assuming that importation is done at the official FX rate.
“Of course, the liberalisation is happening with the parallel rates, which is the main supplier, the price would be even higher. These are just estimates to give you a sense of what cost-reflective pricing most likely looks like.
“We think the price of petrol should be around N750 per litre more than the N650 per litre currently paid by Nigerians,” the apex bank stated.
Sienaert highlighted during a hybrid event in Abuja that the partial return of the subsidy is indicated by the current petrol prices not fully adjusting to market conditions. He urged the government to consider additional measures to secure the benefits of bold reforms undertaken.
As questions surrounding the transparency of NNPC’s oil revenues persist, both domestic and international stakeholders await further actions and responses from the Nigerian government to address these concerns and ensure a more transparent and accountable financial system in the oil sector.
