This was attributed to the payment of subsidy on Premium Motor Spirit, commonly known as petrol.
In a video lasting 5.24 minutes released by the oil major on Sunday, Ajiya explained that the fuel subsidy had a direct impact on the company's ability to remit taxes and royalties to the Federation Account. Additionally, it hindered the company from realizing profits during the specified period.
Also, NNPCL, in the documentary, said, “The lingering constraint of fuel subsidy payment hampered its (NNPCL) growth potential, until a new administration emerged, bringing an end to the subsidy regime and saving the company from bankruptcy and setting it on a path of financial prosperity.”
It stated that this enabled the oil firm to grow its profit from N674.1bn in 2021 to N2.54tn by the third quarter of 2022.
President Bola Tinubu declared during his inaugural speech on May 29, 2023, that “subsidy is gone!” The declaration by the President was immediately enforced by NNPCL the next day. NNPCL is Nigeria’s sole importer of PMS.
Reacting to this, Ajiya said, “That action of saying subsidy has gone, literally saved this nation N400bn on average every month. And what that meant was that the totality of the entitlements of tax, royalties and profits were all going into subsidy.
“And that was why we reached a position in 2022 where we literally remitted zero to the Federation Account. It was unpalatable, but we can’t give what we don’t have.
“We were taking NNPC’s cash flows from other operations to augment for products and it could not be sustained beyond June 2023.”
Fuel subsidy gulped over N3.3tn in 2022, as the Federal Government struggled to hold the cost of the product far below its global market price. The cost of the commodity jumped by over 250 percent immediately subsidy was removed by Tinubu.
Ajiya confirmed that the removal of subsidy had made the company start making remittances into the Federation Account.
“We have now begun to pay dividends to the federation. We are also paying our due obligations in terms of taxes and royalties,” he stated.
The company further stated in the documentary that the end to subsidy enabled it to contribute N4.5tn to the Federation Account in nine months.