MON, 22 AUG, 2022-theGBJournal| According to the recently released data from the Nigerian National Petroleum Corporation Limited (NNPC), the corporation incurred N319.18 billion (or 65.1% of its gross revenue) as PMS under-recovery cost in June (May: N327.07 billion).
The tally now brings the total under-recovery cost in H1-22 to N1.59 trillion – 257.9% higher than H1-21 (N445.34 billion).
That said, we note that the corporation carried forward an N1.01 trillion outstanding balance. Consequently, the NNPC limited estimated that it would deduct N1.49 trillion (consisting of the unpaid balance and estimated July value shortfall of NGN479.69 billion) from July proceeds due to be shared by the three tiers of government at the August FAAC meeting.
Overall, we highlight that the NNPC did not transfer funds to the Federation account for the sixth consecutive month (vs H1-21: N281.97 billion and H1-20: N687.19 billion). We expect under-recovery costs to increase significantly over the short-to-medium term, given the elevated crude oil prices compared to the 2021FY levels.
Accordingly, we estimate PMS under-recovery cost to settle at N3.55 trillion (or 55.3% of our estimated FGN’s retained revenue) in 2022E (vs 2021FY: NGN1.61 trillion or 33.6% of FGN’s retained revenue).
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