The Nigerian National Petroleum Corporation (NNPC) says increasing payment on fuel subsidy has caused its contribution to the federation account to dwindling considerably.
The corporation disclosed this in a document titled, ‘January to March actual and April to June projected remittance to federation account”, which was attached to a letter dated April 26 written to the Accountant General of the Federation, and signed by the NNPC’s Chief Financial Officer, Umar Isa, The Punch reported.
The corporation said that it would only make a contribution of N12.966bn to the Federation Accounts Allocation Committee (FAAC) in June from its revenue after the removal of fuel subsidy.
NNPC also disclosed that its contribution to FAAC in the months of April and May would come only after fuel subsidy has been removed from its revenue.
The FAAC meets monthly to allocate funds to the Federal, state, and local governments based on agreed formula.
It comprises 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 bulk of revenues shared at the FAAC meetings are generated by the Nigeria Customs Service (NCS), the Federal Inland Revenue Service (FIRS) and the NNPC, which contributes the highest.
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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 Punch quoted a senior official of NNPC as lamenting the revenue dip in recent times that has hit the highest contributor to the federation account, as crude oil is the mainstay of the Nigerian economy.
“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,” the official was quoted to have said.
Recall that Edo State Governor, Godwin Obaseki had claimed that printed N60 billion was printed to support the FAAC allocation for March, but the Federal Government denied it.
OPEC had issued cuts on crude oil production quota to its members as a way of shoring up global oil prices.
In abiding with the OPEC directive, Nigeria had reduced its production from 1.8 million to 1.4 million barrels per day, with attendant loss of revenue.
“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 was quoted to have said.
“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.”