SAT, 02 JULY, 2022-theGBJournal| According to the recently released data from the Nigerian National Petroleum Corporation (NNPC), the corporation incurred N327.07 billion (or 69.5% of its gross revenue) as PMS under-recovery cost in May (April: N271.59 billion). However, we highlight that the corporation carried forward an N617.43 billion outstanding balance.
Accordingly, the corporation estimated that it would deduct N845.15 billion (consisting of the unpaid balance and estimated June value shortfall of N227.72 billion) from June proceeds due to be shared by the three tiers of government at the July FAAC meeting.
Overall, we note that the total under-recovery cost in 5M-22 settled at N1.27 trillion – 2.9x the size in 5M-21 (N438.38 billion).
Thus, we are unsurprised that the NNPC did not transfer funds to the Federation account in 5M-22. We expect under-recovery costs to increase significantly over the short-to-medium term, given the rise in crude oil prices compared to the 2021FY levels.
Consequently, we estimate PMS under-recovery cost to settle at N3.55 trillion (or 56.8% of our estimated FGN’s retained revenue) in 2022E (vs 2021FY: N1.61 trillion or 34.3% of FGN’s retained revenue).-with Cordros Research analysts
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