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REVIEW… NNPC WALL OF SECRECY: Why war over revenue sharing may not end soon



REVIEW... FAAC remittance and the opaque nature of NNPC operations

Nigerian workers have been subjected to hard times and difficulty in meeting basic family needs for most parts of the month as for about four times, the Federation Account Allocation Committee (FAAC’s) technical session was abruptly adjourned last month (June) on account of Nigerian National Petroleum Corporation (NNPC) failing to make accurate returns to the federation account.

According to Kemi Adeosun, Nigeria’s finance minister, the deadlock was as a result of proposed revenue payments by the state oil company to the government account which were unacceptable because they were less than expected in view of raised crude oil prices and sales.

Adeosun told the National Economic Council (NEC) advisory body that the company’s accounts had not been approved because some costs could not be justified, claiming that government has been short-changed by the NNPC.

NNPC remittance rejected based on the state of global oil price and sales

The minister explained that the government wanted to be saving aggressively into the Excess Crude Account (ECA) especially with oil price at $76 per barrel in the spot market and Bonny Light at about $78 but the figures from NNPC as presented at the FAAC meeting last month (June) was inconsistent with the state of global oil price and sales.

During the FAAC meeting, Adeosun said; “We operate the NNPC as a business. We have invested public capital in that business, and we have expectations of return. And when that return falls lower than our expectations, then the owners of this business, which in this case are the Federal Government and states, need to act.

“So, that was what caused the deadlock and we really felt the figures the NNPC was proposing for FAAC were unacceptable. We felt that some of the costs couldn’t be justified, and so we have decided that rather than approve the accounts, we will go back and do further work,” Adeosun told journalists on Thursday after state government joined their finance commissioners to examine the discrepancies in NNPC’s figures.

Reacting further to the deadlock, the minister said the government needed to act once its expectations from the firm were not met because the NNPC is operating as a business.

“In my capacity as the chairman of FAAC, I briefed governors on the deadlock that we have got currently in the Federation Account and explained what happened. There was quite an extensive debate on what to do.

“Further negotiations and interactions are going on with the NNPC as we speak. However, we did brief both Mr. President and Mr. Vice President on the deadlock and asked for their support and their forbearance in this, because the consequence of this is that salaries might well be delayed in many states as a result of this.

“But we feel that in order to get to the accurate figures that we need, we have asked for forbearance and the governors and the Federal Government are all in agreement that we need to get to the bottom of those figures.

“Based on oil price and oil quantity, you can calculate what you are expecting to see in the Federation Account and if the figure is less, then the right question that any stakeholder must ask is why? So, we have been going back and forth with the NNPC to try and understand these figures before we can accept them,” she added.

Adeosun said FAAC figures have to be formally accepted by the federation account committee but as it is, the government is not comfortable with the quantum of some of the deductions made and, therefore, did not approve the figures presented by the NNPC.

She also informed that an interface was ongoing among the Commissioners of Finance Forum, Ministry of Finance, Office of the Accountant-General, the CBN and the NNPC over the matter.

Governors asking NNPC for additional N40 billion remittance

REVIEW... FAAC remittance and the opaque nature of NNPC operations

The NNPC however, in a statement said its 147 billion-naira ($482 million) June remittance to the government account was in line with terms agreed with state governors who made fresh demands.

According to Mr. Ndu Ughamadu, the Group General Manager, Group Public Affairs Division of the NNPC, the Governors are asking the corporation to remit additional N40 billion to the Federation Account Allocation Committee, FAAC.

Ughamadu said the NNPC had earlier agreed with the governors to make a monthly remittance of N112 billion to the FAAC, but the NNPC was able to exceed the amount by N35 billion, bringing its remittance in June 2018 to N147 billion.

The NNPC Group General Manager said the state oil company had to secure the extra funds from amount meant for meeting its Joint Venture cash call obligations and describing the demands of the governors as unfortunate based on the aforementioned move to secure more cash.

Read also: FAAC to probe FIRS over alleged under remittance

VP calls for supporting documents from NNPC over N20 billion underpayment

REVIEW... FAAC remittance and the opaque nature of NNPC operations

Following the deadlock between NNPC and the Federation Accounts Allocation Committee (FAAC), Vice President Yemi Osinbajo was asked to wade into the matter.

The lot fell on Osinbajo as the chairman of the National Economic Council to resolve the disagreement.

Immediately, the VP moved to resolve the matter by directing the state oil company to forward all relevant documents on monthly revenue to his office in order to resolve the alleged underpayment to the federation account to the tune of N20 billion.

The House of Representatives has also ordered an investigation into the alleged underpayment of over N100bn to the Federation Account by the NNPC with many hoping that such interventions will have the potential of addressing the fiscal unaccountability that has been bedeviling Nigeria’s public finance for too long.

Similarly, FAAC said it would soon begin to probe alleged shortfall in revenue remittance by the Federal Inland Revenue Service (FIRS).

The commission said it would focus on FIRS after tackling the under remittances issue with the NNPC.

FAAC accuses NNPC of willfully withholding N20billion

At the last meeting in June, FAAC pointedly accused NNPC of willfully withholding N20 billion, having established that the expenditure claims by the state oil company were out of sync with the extent template for determining the revenue accruable to the three tiers of government.

Mahmoud Yunusa, the chairman of the Forum of Commissioners of Finance, argued that the NNPC had not been transparent with the 36 states of the federation in the management of its operations, stressing that while the oil firm claimed to have remitted N147 billion into the Federation Account for June, what was actually received was N127 billion.

Yunusa noted that NNPC “claimed it spent N3.5 billion on product leakages, pipeline vandalism, but the Department of Petroleum Resources (DPR) an agency that is supposed to keep such records and data claimed ignorance of the amount.”

He also stated that state governments and other FAAC members opposed to NNPC “know that workers are facing difficulties but this is a sacrifice that all of us must do to get out of these problems of NNPC lack of transparency and under-remittance. If the process is operated the way it is supposed to, nobody will complain.”

Yunusa added that the NNPC must demonstrate transparency in its operations and in the remittance of oil revenues into the Federation Account.

He said NNPC could not just remit whatever amount that pleased it into the federation account, as the modality for calculating monthly oil revenue was clear.

Recurring remittance rejections

REVIEW... FAAC remittance and the opaque nature of NNPC operations

Since the turn of the year, the Federal Government has rejected four remittances by the NNPC over the failure by the state oil company to hand over accurate returns despite rising oil prices and sales.

At the February FAAC meeting, the NNPC presented a total of N111,835,458,519 as its January revenue with the States wondering why the revenue for February crashed to N74 billion, (with a differential of N37,769,273,081), despite a rise in global oil prices and zero records of pipeline vandalism at the time.

In the month of March 2018, the FAAC meeting had ended in a deadlock because of a shortfall of N37.7 billion in NNPC remittances to be shared by the local, state and federal governments.

A month later in April, the Federation Account Allocation Committee meeting, which was scheduled to hold as well as approve statutory allocation for the month of before (March), was postponed due to what was cited as revenue discrepancies.

The Federal Government, States and Local Governments of the federation received a total sum of N608.33 billion as allocations in May, the National Bureau of Statistics (NBS) said at the time.

The amount was part of the sum of N701.02 billion disbursed by the Federation Account Allocation Committee (FAAC) disbursed in May 2018 from the revenue generated in April 2018.

In the month of June, the FAAC meeting was adjourned again as there was no agreement with the states contending that the NNPC, as the greatest revenue generator, has no justifiable reasons to declare a shortfall in the amounts it pays into the federation account month after month, especially when the international crude oil price had trended above the $51/barrel economic benchmark pegged by the government for 2018.

Three weeks after the June 27, 2018, deadlock, the rescheduled FAAC meeting was again inconclusive because the FG could not reach an agreement with the NNPC “on how much to share and what it is bringing to the table.”

It is also worthy to note that oil prices have been relatively stable in the last six months with the commodity sold at $70 per barrel in January, $65 per barrel in February, $70 per barrel in March, $73.79 per barrel in April, $75 per barrel on the 1st of May, $74 per barrel and $75 per barrel in the month of June.

Lack of transparency and due diligence

REVIEW... FAAC remittance and the opaque nature of NNPC operations

The lack of transparency and due diligence by the NNPC in its operations is reinforced by a report by the Nigeria Extractive Industries Transparency Initiative (NEITI) which says that the country has lost about $20 billion dollars from the oil and gas sector over the years.

The huge losses according to NEITI are recoverable revenues from process lapses in the sector leading to under-assessment or underpayment of taxes, royalties, signatures bonuses, etc.

NEITI in the report also stated that it has recovered over $3 billion from oil and gas companies operating in the country into the Federal Government’s coffers.

To alleviate the plight of workers, the FAAC on Friday finally shared N668.89 billion from the Federation Account as revenue generated in May to the three tiers of government.

In a statement issued on Friday in Abuja, the Director of Information, Federal Ministry of Finance, Hassan Dodo, said that the distribution of the funds did not signify the end of the dispute between FAAC and some revenue generation agencies, especially NNPC.

“Owing to disagreement on remittances by the Revenue Generating Agencies, especially the NNPC, the sharing of revenues for May 2018 that was meant to be distributed in June 2018 was put on hold.

“However, the urgent need to cushion the undue hardships being experienced by workers nationwide has made it necessary to distribute the May figures, totalling N668.898 billion to the three tiers of government,” he said.

It is needless to say that the Federal Government’s continued over-bearing influence on NNPC is fueling the ongoing war over oil revenue accruals and allocation between the Federation Account Allocation Committee, and the state oil company.

Close watchers are also disturbed that non-remittance or diversion of the NNPC revenue, which was one of the key element of the corruption allegation upon which a vicious political war was waged against former President Goodluck Jonathan in 2015, is still very much with us despite three years of “change” under the incumbent President Muhammadu Buhari, who doubles as the minister for petroleum resources.

And weeks after the matter was referred to President Buhari for his intervention, it appears that the President is yet to get a handle on the issues, thus prompting a prolonged showdown of talks with all parties firmly sticking to their positions.


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