NNPC’S federation account remittance falls to 13-month low

… as subsidy gulps N206bn in first two months of 2019

Another round of fiscal distress may be brewing between the Federation Account Allocation Committee (FAAC) and Nigerian National Petroleum Corporation (NNPC) as decreasing remittance reduces available funds to states to 13 months low of N32.4 billion. N np c’ s falling remittance to the federation account in 2019 would harm state governments in two ways. An increase in the budget benchmark of crude oil to $60 per barrel means that if oil prices trend below this the states will get less in terms of revenue. The other implies difficulties in paying the minimum wage of N30,000, due to lack of funds. The frosty relationship between the 36 states of the federation, the Federal Capital Territory (FCT) and the management of NNPC since

March 2018 has continued to deteriorate, with everyday nigerians and civil servants taking a hit without understanding what has hit them. Latest data from the NNPC show that as of February 2019 the state corporation’s remittance to FAAC shrank with total payment standing at N32.4 billion, an 83 percent decrease compared with N189 billion allocated in February 2018. A further breakdown shows the NNPC is still unable to reach the N205 billion remitted to FAAC in March 2018, as monthly remittance declined to N175.7 billion in November, which further decreased ton 174.9 billion in december 2018, while January 2019 and February 2019 remittances stood at N51.6 billion and N32.4 billion, respectively. Dwindling revenue into the federation account would make it harder for state governments to effectively execute their budget, especially the capital expenditure side, according to Paul Uzum, managing director, Nigerian Capital Management Limited. While NNPC’S remittance to FAAC seems to be declining thereverse is the case for subsidy, another name for under-recovery. Despite spending N730.9 billion on subsidy in 2018, Africa’s biggest oil-producing country has spent N206 billion in the first two months of 2019, an amount which would have increased the economic growth or standard of living of its over 180 million people. “There are many fundamental issues that are wrong with how the subsidy is being managed in this country; there is every likelihood we might hit N1 trillion before the end of 2019,” ad em ola henry, team lead at the Facility for Oil Sector Transformation (FOSTER), said, noting, “Fa ac will always make the normal noise and go home; they can only bark but they can’t bite.” Last year, FAAC’S representatives, consisting mainly of commissioners of finance and accountants General, refused to share the revenue made available by the NNPC as statutory allocation for the three tiers of government for June 2018. Although no member of the committee explained why they refused to share the available revenue, then Minister of Finance, Kemi Adeosun, said the deadlock was as a result of the “unacceptably low” revenue remitted by then npc for sharing. Over time, states are contending that the NNPC, as the greatest revenue generator, has no justifiable reason to declare a shortfall in the amount it pays into the federation account every month, especially when the international crude oil price had trended above the $60/barrel economic benchmark pegged by the government for 2018 fiscal year. They have also called on the corporation to make full disclosures of its earnings, stressing that the usual disagreements were a direct product of transparency deficiency.