A serious revenue nightmare awaits Nigeria’s 36 states and the FCT as the Nigerian National Petroleum Corporation (NNPC) said it won’t be able to meet up with its monthly remittance to the Federation Accounts Allocation Committee (FAAC) for the month of May.
With this disclosure by the NNPC, it suffices to say the revenue crisis that has paralyzed government spendings for months may not abate anytime soon.
In a letter to the Accountant-General of the federation, the corporation hinted that its decision to deliver zero remittance to FAAC in May stemmed from the burden of fuel subsidy payments in recent months.
The letter dated April 26, 2021 was signed by NNPC Chief Financial Officer, Umar Ajlya Isa, reports revealed.
According to the NNPC, N111.96 billion will be deducted from its oil and gas proceeds in April that should have been remitted to the federation accounts as contribution to May’s FAAC.
The corporation noted that the deduction was necessary to guarantee the continuous supply of petroleum products in the country.
The letter stated that “The Accountant General of the Federation is kindly invited to note that the average landing costs for Premium Motor Spirit for the month of March 2021 was N184 per litre 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.”
It continued: “As the discussions between Government and the Labour are yet to be concluded, NNPC recorded a value shortfall of N111.966,456,903.74 in February 2021 as a result of the difference highlighted above. Accordingly, a projection of remittance to the federation for the next three months is presented in the attached schedule.
“Accordingly, 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.
“This is to ensure the continuous supply of Petroleum Products to the nation and guarantee energy security. Please accept the assurances of my highest regards.”
The New Diplomat had reported that the Group Managing Director of NNPC, Mr Mele Kyari had said the corporation pays N120 billion every month to subsidise Premium Motor Spirit hinting that with continuous increase in global oil price, the corporation may not continue to bear the burden.
Kyari lamented that the burden placed upon NNPC by the ongoing subsidisation of the cost of petrol in the country was overwhelming.
He stated that the NNPC can no longer bear the monumental cost, saying market forces must be allowed to determine the pump price of petrol in the country in the nearest future.
Amid the dwindling revenue allocation to states, FAAC had last week managed to share the sum of N680 billion among the three tiers of government for the month of April.
The New Diplomat reports that the declining revenue profile of the nation has generated tension between the federal and state governments recently.
The disagreement between officials of the two tiers of government over the poor revenue led to a stalemate at last month’s FAAC meeting, it was learnt.
According to top sources, the disagreement was responsible for the failure of the Finance ministry to issue any statement on FAAC sharing last month.
Recently, a claim by Edo State Governor Godwin Obadeki that the federal government printed N60 billion to augment March Federation Accounts Allocations had generated endless debate in the country, something the President Muhammadu Buhari-led administration has since denied.
But now, the zero remittance from NNPC to FAAC will further expose the financial status of the country as it will have dire effects on the monthly allocation to states in the coming months.
It also means many states, save Lagos, Rivers, Delta, Ogun, FCT and Kaduna with high IGR, will not be able to meet up with their statutory obligations including payment of salaries to workers as majority of the state governments go cap in hand to the central government monthly, begging for their share of the FAAC, having failed to generate revenue internally to cope with financial shocks in times such as this.
According to the National Bureau of Statistics, Lagos state recorded the highest IGR of N418.99 billion in 2020, closely followed by Rivers with N117.19 billion and the FCT with N92.05 billion.
Delta state recorded N59.732 billion, Kaduna N50.768 billion while Ogun raked in N50.749 billion as IGR in 2020.
