The Nigerian government incurred N623.17 billion on petroleum products supply under-recovery cost between January and November this year, a summary of the monthly estimates of the expenditure by the Nigerian National Petroleum Corporation (NNPC) has shown.
The document obtained by PREMIUM TIMES was part of details of NNPC financial operations submitted to the Federation Account Allocation Committee (FAAC) during its monthly funds’ allocation meeting in Abuja last week for November 2018.
Details of the costs included under-recovery under the direct sale-direct purchase (DSDP) refining arrangement between January and November as well as the local refining cost between January and September this year.
The document dated December 19, 2018, showed that cumulative outstanding under-recovery cost brought forward from 2017 stood at about N78.4 billion, with arrears of about N67.23 billion, while total reimbursement or FAAC deduction was about N676.49 billion for the period under review.
Of the N676.49 billion, about N599.7 billion was incurred as under-recovery under the DSDP arrangement, while about N23.4 billion was under-recovered from the operations of the four local refineries in Warri, Port Harcourt, and Kaduna.
Under-recovery is the name coined by the NNPC to represent the amount of subsidy the corporation incurs on behalf of the federal government for the importation and supply of petroleum products at a landing cost above the official retail pump price of N145 per litre of Premium Motor Spirit, popularly called petrol.
Similarly, the DSDP arrangement involves direct purchase by accredited oil marketers of a portion of the 445,000 barrels of crude oil usually allocated for domestic refining allocation. The volume purchased is meant to be refined abroad, while refined petroleum products are brought into the country for consumption.
The DSDP arrangement was introduced in 2016 to replace the controversial swap arrangement adopted by the previous government as a result of the poor refining capacity of the four local refineries.
A review of the document submitted to the FAAC showed that showed that about N51.3 billion was incurred as under-recovery cost in January, while February, March, and April recorded N58.7 billion, N36.1 billion, and N82.4 billion respectively.
In May, the document showed the cost under-recovery on PMS by NNPC dropped to about N36.9billion, before increasing to about N53.4 billion in June, N52.4 billion in July and N63.2 billion in August.
