Despite recording a gross revenue of over N2.8 trillion from crude oil and gas sales this period, the Nigerian National Petroleum Company Limited (NNPC) has failed to carry out its obligation of remitting funds to the account of the federation for seven straight months.
NNPC was expected to remit funds into the account of the federation, which will then be distributed to the three tiers of government.
They however, noted that it deducted the funds meant to be remitted to the Federation Accounts Allocation Committee, (FAAC) to cover petrol subsidy over the months, resulting in zero revenue remittances, also stating that it would no longer remit any money to the FAAC account following its transition to a limited liability company.
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What the NNPC implies is that following its transition, it currently owes no money to FAAC, as all monetary arrears to the committee were owed by the old corporation and not the new limited liability company.
Recall that President Buhari in July unveiled the NNPC as a limited liability company, declaring that the new entity was henceforth free from institutional regulations.
Currently, it has been reported that some states in Nigeria with low internally generated revenue (IGR), are badly hit, as they now owe their workforce for several months, following the prevailing development of NNPC that has worsened their financial crisis.
Displeased with the financial crisis some states are currently faced with, legal practitioner, Ledum Mitee, stated that the 13 percent derivation to the oil-producing states was under threat in the present circumstance.
In his words;
“I think the unveiling of NNPC Ltd has grave implications to the states, especially of the oil-producing states. I think the states and the local councils took their eyes off the ball and they were done for in the passage of the PIB into PIA,”
Mr. Mitee further urged states not to hesitate to proceed to the Supreme Court to set aside several offensive portions of the PIA.
Another legal practitioner Madaki Ameh commenting on the issue, disclosed that the prevailing situation was raising germane legal issues which would need to be addressed as the PIA is implemented.
He, however, differed from what Mitee suggested on the issue of 13 percent derivation, stating that while Section 44(3) of the 1999 Constitution vests ownership of petroleum resources on the Federal Government, the same Constitution provides for sharing of revenue and makes provisions for 13 percent derivation.
He stated that for accounting purposes, revenues accruing to the Federal Government from oil and gas activities carried out by the NNPC Ltd will still have to be shared in compliance with the provisions of the constitution, and this would include the NHT and CIT payable by NNPC and other companies operating in the oil and gas industry.
According to him, the funds available to FAAC for distribution to states have been coming from FIRS and Customs, adding that it has taken a toll on the revenues available to states.
Mr. Madaki insisted that the sub-national governments needed to look inwards and improve their internally generated revenue potential.
He however called on the Federal Government to devise ingenious ways to solve the subsidy quagmire, saying it has become unsustainable in view of dwindling revenues and increased debt service obligations.
There is no disputing the fact that this dwindling revenues states are currently faced with, would create an expected negative impact on the ability of affected states to meet their obligations and also lead to renewed agitations for resource control.
Defaults on payment of salaries, pensions, and delivery of basic services will continue to increase unless the governors become innovative and think outside the box.
With a projected N1.473 trillion payment to the federation for the entire year and a monthly remittance of N122.767 billion, the implication is that the federal, state, and local governments may continue to have cash shortages for a while since the payments constitute a major revenue source.