Nigeria may be at risk over bloated oil subsidy — LCCI
The Lagos Chamber of Commerce and Industry (LCCI) has warned that Nigeria may face a major risk of disruption if the bloated oil subsidy erodes the capacity of the Nigerian National Petroleum Corporation (NNPC) to contribute to the Federation Account.
The caution came on the heels of the alert from the NNPC to the federal and state governments over its dwindling contributions to the Federation Account as a result of the increased fuel subsidy.
LCCI Director-General, Dr Muda Yusuf said the unfolding scenario is troubling, adding that it is a consequence of the perpetuation of an unsustainable subsidy regime.
He said if NNPC becomes incapacitated because of the burden of funding subsidy, the implications for states, and local government would be very dire.
“The social and economic systems of many states and local governments would be at risk of collapse.
“NNPC is a major source of funds into the Federation Account; many states are about 80 per cent dependent on revenue allocations from the federation account. Infrastructure spending will suffer serious setbacks across all levels of government, payment of salaries will be at risk, fiscal deficit may escalate and debt sustainability issues would be aggravated,” Yusuf said.
He advised on the need for a creative and innovative exit strategy from the subsidy regime. The LCCI boss said it was also important to address the fiscal federalism question to reduce the high dependence of subnationals on the centre.
It would be recalled that the disagreement between the governors and NNPC emanated from when the agency said it would only be able to remit N12.966billion to the Federation Accounts Allocation Committee in June after removing fuel subsidy from its income.
The corporation, which stated this in a document entitled: ‘January to March actual and April to June projected remittance to federation account,’ indicated that it would not make any remittance last month and this month’s 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 affecting 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 cash shared at FAAC comes from revenue 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.
Earlier, the Edo State Governor, Godwin Obaseki, said the Central Bank of Nigeria (CBN) printed N60 billion to augment the March allocation, following a shortfall in revenue generation. But the Federal Government denied the allegation.
However, an analysis of the NNPC’s projection shows that while the net revenue to FAAC last month is N111.966billion, the corporation’s value shortfall as a result of petrol subsidy is put at N111.966billion, leaving zero remittance as the net revenue to FAAC after value loss.
This month, net revenue to FAAC is projected to be N171.747billion; the NNPC value shortfall is put at N171.746billion, leaving zero remittance as the net revenue to FAAC after value loss as a result of fuel subsidy payment.
Next month, the projected net revenue to FAAC is put at N105.337billion, the NNPC value shortfall is N92.371billion, while the net revenue to FAAC after value loss is put at N12.966billion.
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 N96.86billion, N64.16billion and N41.184billion.
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.”
