President Bola Tinubu has approved the Nigerian National Petroleum Company (NNPC) Limited to utilize the 2023 final dividends owed to the federation to cover the cost of petrol subsidies, according to a report by The Cable.
Additionally, the president has directed that payments of 2024 interim dividends to the federal government be suspended to improve NNPC’s cash flow.
A forecast from NNPC, as seen by the publication, indicates that petrol subsidy expenses from August 2023 to December 2024 are projected to total N6.884 trillion. This substantial expenditure will leave the company unable to remit N3.987 trillion in taxes and royalties to the federation account.
Under the Petroleum Industry Act (PIA), NNPC is required to pay taxes, royalties, and dividends to the federation, its sole shareholder. In June 2024, NNPC informed President Tinubu that the subsidy payments were severely affecting its cash flow, putting the company’s financial stability at risk and challenging its ability to sustain petrol imports due to escalating subsidy costs and forex pressures.
As a result, NNPC is expected to halt the payment of interim dividends from May to December 2024. Interim dividends, which are typically based on inflow projections and paid monthly into the federation account, are distributed among the three tiers of government. In contrast, final dividends are settled at the end of the year following a reconciliation process.
