The frosty relationship between the 36 states of the federation, the Federal Capital Territory (FCT) and the management of the Nigerian National Petroleum Corporation (NNPC) since March 2018 has continued to deteriorate steadily with Nigerian citizens including civil servants taking a hit unknown to many. At the heart of this ugly trend is the incessant shortfall in monthly revenue paid into federation account by the national oil company.
Last week’s postponement marks the fourth in what many feel has become a recurring decimal in the annals of FAAC’s monthly meetings. This was even as the Minister of Finance, Kemi Adeosun warned that the latest controversy may affect payment of Salaries of Federal and States civil servants
The States are 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 months, especially when the international crude oil price had trended above the $51/barrel economic benchmark pegged by the government for 2018.
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.
But the NNPC for its part attempted to justify the N147 billion paid into the federation account for June, saying it was in line with the terms of agreement it had with 36 State Governors on the matter.
The NNPC Spokesman, Mr. Ndu Ughamadu, in a statement last week said that the agreement the Corporation had with the Governors was that it would make a monthly remittance of N112 billion to FAAC subject to availability of funds from sales of domestic crude oil allocation for the corresponding month after meeting cash call obligations on JVs, deductions of Premium Motor Spirit (PMS) cost under recovery and pipeline maintenance.
He added that NNPC was able to surpass the terms of agreement with the governors on the monthly remittance for the month of June by N35 billion, having taken a cue from their postures by taking from the sum meant for settling cash call obligations.
The Corporation, according to Ughamadu, regretted the Governors’ additional request of N40billion, saying it was unfortunate, given the fact that NNPC was set to exit the cash call phenomenon soon.
But as both parties bicker, the rancorous development has led to a serial adjournments of FAAC meetings, thereby delaying operations in several states, especially in the payment of workers’ salaries.
March, April and June FAAC meetings were rowdy with the usual disagreement over NNPC remittance, a situation that always forced the Minister of Finance, Mrs Kemi Adeosun, to intervene to soothe agitated nerves as FAAC Chairman. It was on record however that the meeting of the Federal Account Allocation Committee (FAAC) held on March 27 in Abuja ended in deadlock as the Commissioners of Finance of the 36 States and the Federal Capital Territory (FCT) rejected the February revenue figure of N74,067,185,439 presented by the NNPC.
At the February FAAC meeting, the NNPC presented a total of N111,835,458,519 as its January revenue and the States were 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 record of pipeline vandalism within the period.
The Accountant-General of the Federation (AGF), Ahmed Idris, in his efforts to clarify issues in March, said the FAAC allocation will be shared after another meeting was convened and reconciliation done.
As would be expected, salaries for March was delayed a bit as states got their allocation after all grey areas were ironed out.
Idris said: “Let me be quick to tell you that the meeting was inconclusive because issues around reconciliation of figures are on the table. Obviously, you are all aware that anything that has to do with federation revenue is statutory and therefore constitutional. And we must always verify our figures to the last kobo, failing which we will be committing illegality and unconstitutionality.
“It is on that note that we observed some issues in the figures given by one of the major revenue generating agencies being the NNPC and the committee is of the opinion that until and unless these figures are reconciled, corrected, verified as factual, we cannot distribute the revenue. That is the case we have here..
“Let me again be quick to inform Nigerians that we are sensitive to the issue and we are very sensitive to the fact that the state governments as represented by Commissioners of Finance are sensitive to the issues but again, we have to follow the constitution and the necessary laws for distribution of revenue and it is on this note that I inform you that the meeting has not been concluded.
“We have to explain this to Nigerians bearing in mind that as civil servants, workers in the federal, states and local governments deserve to have their salaries and all other commitments of government”, Idris explained.
On how much was in contention, he said what will be shared in March will be higher than February figures.
He however assured that the next meeting would hold as soon as possible.
In his remarks, the Chairman, Commissioners of Finance Forum, Mahmoud Yunusa, said the
NNPC delayed in submitting its figures for
“We started this meeting last week and NNPC did not submit its figures until yesterday (Monday) which we were not able to review until this morning.
“This morning when we were reviewing the figures as presented by the NNPC, it came as a great surprise to see that the amount was less than N100 billion.
“So we decided that we will not collect the figures presented, that we will contest it. And we are contesting the figures because pipeline vandalism had reduced while crude oil prices has continued to go up.
“So we are wondering why the nation cannot raise enough money through that sector to share to states so that everyone can pay workers, contractors and so on.
“We are well aware that this development may affect the payment of salaries in states, but
we cannot hurriedly accept this money and then later cry foul play “So we are should be patient. But we hope that with this latest development, NNPC will do the needful as soon as possible, Yunusa stated.
However, NNPC in its presentation said N74,067, 185,437 was collected in February, 2018.
The Corporation said it was unable to meet the approved budget as a result of low collection from concession rentals and Petroleum Sharing Contract (PSC) royalty.
“We wish to note that the sum of N30,507,794 for the miscellaneous oil revenue and N6,112,940 for gas flared are in transit as the end of February 2018.
“Furthermore, we received a sum of $16,560,331.50 from the $85,942,414.62 expected from PSC and Modified Carry Agreement (MCA) for the month under review; leaving $68,654,609.12 as outstanding”, the NNPC said.
In May, the same scenario played out and forced the State Governors to hold an emergency meeting with the management of the NNPC at the Presidential Villa to resolve the logjam.
The Chairman, Finance Commissioners Forum, Mallam Yunusa Mahmoud, described the development as most unfortunate and one that required Governors’ intervention.
He said: “We have some challenges. The figures we got is far less than what we expected to be remitted by NNPC. As it is now, there is a meeting between the governors and the top management of NNPC at the villa. I believe this is a very high level deliberation and something good will come out of it”, he added.
He said NNPC was duty bound to carry FAAC stakeholders along in its business, pointing out that any opaque dealings will naturally raise burning questions.
“There are processes. Before now, you don’t hear such news. Whatever issues, you get you deliberate on it, but because this government is a government of change, some level of transparency is expected.
“When you pick your figures and you submit your figures, the person that is supposed to look at it and deliberate on it will ask questions if need be”, he noted.
Economic experts say majority of the States (with the exception of Lagos, Rivers and a few others) rely heavily on the monthly FAAC allocation for survival such that any attempt to subtract from the projected revenue to be shared, sets them in battle mode because it jolts them.
As a matter of constitutional entitlement, the States get monthly bounty from the Federal Government, with which they pay workers salaries at the state and local government levels; pay contractors, carry out projects, among other things.
They have also argued that majority of the State governments are plagued by profligacy, zero creativity in revenue generation and job creation; such that over the years, they have plunged their states into heavy debts, forcing them to continually cling tenaciously to the monthly FAAC disbursements for lifeline.
Commenting on the incessant logjam and the implications on the States’, the Head of Department, Banking and Finance offer Nassarawa State University, Prof Uche Uwaleke said the rancour denies the State governments funds to pay their workers salaries and carry out projects.
He said: “It doesn’t augur well for the States and LGAs. The issue here borders on transparency. It borders on total disclosure on what goes into the federation account. When states feel something is withheld, there is bound to be rancorous FAAC sessions.
“All the major revenue generating agencies led by the NNPC should be more transparent. All their earnings should be properly accounted for so that everyone goes home happy.
“The Finance Minister and the AGF have roles to play on what comes in and shared”, he said.
In his views, the former Managing Director of Unity Bank Plc, Mr Rislanudeen Mohammad also agreed that rancour can only be avoided through transparency of the payments made by the NNPC into the federation account.
“Once it’s not clear, it breeds crisis. Most of the states rely heavily on FAAC allocations and so they won’t take it lightly when there are discrepancies because they don’t have other reliable sources of revenue. Some of the States are burdened by huge debt and they have exceeded their borrowing capacity and they’re heavily geared.
“It is their entitlement and so if they expect a N20 cheque and you are giving them N14, where will the balance come from and that is what the states are saying. They are very desperate for the money and transparency is key for mutual trust to be built”, he said.