The Nigerian National Petroleum Corporation (NNPC) has alerted the federal and state governments to its dwindling contribution to the federation account as a result of the bloated fuel subsidy.
It said it would only be able to remit N12.966bn to the Federation Accounts Allocation Committee (FAAC) in June after removing fuel subsidy from its income.
The corporation, which stated this in a document titled, ‘January to March actual and April to June projected remittance to federation account,” indicated that it would not make any remittance for the April and May FAAC after paying fuel subsidy from its revenue.
The document, which was attached to a letter written to the Accountant General of the Federation, was dated April 26 and signed by the NNPC’s Chief Financial Officer, Umar Isa.
In the letter, copies of which were sent to the Minister of Finance, Budget, and National Planning; the Director-General of the Nigeria Governors’ Forum; the Director, Home Finance; and the Chairman, Commissioners of Finance Forum, the corporation explained how fuel subsidy had been affected its revenue to FAAC.
FAAC committee, which meets monthly to share funds among federal, state and local governments, consists of the finance minister, state commissioners of finance, state accountants – general, accountant-general of the federation and the permanent secretary of the Federal Ministry of Finance.
The money shared at FAAC comes from revenues generated by the Nigeria Customs Service, the Federal Inland Revenue Service and the NNPC. However, Nigeria’s oil corporation is the highest contributor as crude oil is the biggest source of revenue for the country.
Recall that a statement by the Edo State Governor, Godwin Obaseki, that the Central Bank of Nigeria printed N60bn to augment the March allocation following a shortfall in revenue generated controversy with the Federal Government denying the allegation.
An analysis of the NNPC’s projection in the document obtained by one of our correspondents on Wednesday, shows that while the net revenue to FAAC in April is N111.966bn, the NNPC value shortfall as a result of petrol subsidy is put at N111.966bn, leaving zero remittance as the net revenue to FAAC after value loss.
In May, net revenue to FAAC is projected to be N171.747bn, the NNPC value shortfall is put at N171.746bn, leaving zero remittance as the net revenue to FAAC after value loss as a result of fuel subsidy payment.
In June, the projected net revenue to FAAC is at N105.337bn, the NNPC value shortfall is N92.371bn, while the net revenue to FAAC after value loss is put at N12.966bn.
According to the document, the NNPC in the letter stated that in January, February and March, the oil firm’s net revenue to FAAC after value loss were N96.86bn, N64.16bn and N41.184bn respectively.
The letter read in part, “The Accountant-General of the Federation is kindly invited to note that the average landing cost of premium motor spirit for the month of March 2021 was N184 per litre as against the subsisting ex-coastal price of N128 per litre, which has remained constant notwithstanding the changes in the macroeconomic variables affecting petroleum products pricing.
“As the discussions between government and the labour have yet to be concluded, the NNPC recorded a value shortfall of N111,966,456,903.74 in February 2021 as a result of the difference highlighted above.
“The AGF is invited to note that the sum of N111,966,456,903.74 will be deducted from April 2021 oil and gas proceeds due to the federation in May 2021, which will translate to zero remittance to the Federation Account from NNPC in the month of May 2021.”
The NNPC wrote the letter as its officials told one of our correspondents that being the major contributor to FAAC, it had been facing serious revenue challenges in the recent past.
An impeccable source at the corporation, who spoke on condition of anonymity, due to the nature of the subject, said, “The NNPC, the FIRS, Customs and the NPA, all revenue generating agencies, contribute specified quantum to FAAC. But the largest contributors are usually the NNPC and the FIRS.
“So once there is a shock to the NNPC’s revenue yielding capacity, it will affect the entire federation. On several occasions, the NNPC has been accused of not disclosing all the revenues it makes.
“Since last year, even before COVID-19, the corporation had a challenge in terms of revenue and this was worsened by COVID-19, as well as the oil production quota allotted to the NNPC by OPEC.”
OPEC, an organisation which has Nigeria as member, asked its members to cut down on the volume of crude they produce in order to help shore up global oil prices.
Nigeria had to cut down its production from over 1.8 million barrels per day to about 1.4 million barrels per day in keeping with the demand of OPEC, a development that had also reduced crude oil revenues for the country.
“All these variables worsened the revenue capacity of the corporation. So what the corporation has done now is to alert FAAC through the AGF. The Edo State governor was actually raising this issue, although he did not put it rightly,” the source stated.
The official added, “And right now as it stands, there are fears that it may get to a point where the corporation might find it tough to even pay salaries. It is that bad.
“Even last year, there was the concern that salaries for September would not come as expected. The challenge is now coupled with the bloated subsidy, because the NNPC is shouldering subsidy 100 per cent.”
The source stated that the subsidy issue made the NNPC to request loan from the Central Bank of Nigeria some years ago.
The official said, “About two years ago or so, the corporation obtained approval from the President on the need to have a sort of a revolving loan from the CBN for servicing some of these subsidies, then the corporation will be making up as it generates enough.
“The committee set up to handle this was made of the NNPC, Ministry of Finance, the CBN, the FIRS, among others. This committee was able to generate enough revolving loan for the NNPC to service the subsidy then.”
When contacted on the matter and asked how the government intends to raise funds for FAAC, the media aide to the Finance Minister, Yunusa Abdullahi, simply replied, “You are jumping the gun. We are in April.” – Punch.