NNPC Set to Deliver Zero FAAC Remittance in May as Subsidy Payment Bites Harder

Wednesday, April 28, 2021 / 11:48 AM / ByFikayo Owoeye of TheCable / Header Image Credit: NNPC

The revenue drama that dominated the public space inthe past weeks does not look like it will end anytime soon.

This is because the Nigerian National PetroleumCorporation (NNPC) has disclosed that its projected monthly remittance to thefederation accounts allocation committee (FAAC) for May will be zero.

The corporation said this in a letter to theaccountant-general of the federation, on Tuesday, a copy of which was seen byTheCable.

In March, Mele Kyari, group managing director (GMD) ofthe Nigerian National Petroleum Corporation (NNPC), had warned that thecorporation can no longer bear the burden of underpriced sales of premium motorspirit (PMS), better known as petrol, to consumers in the country.

He, however, promised that there will be no increasein the price of petrol until talks between the government and stakeholders areconcluded.

"The price could have been anywhere between N211 andN234 to the litre. The meaning of this is that consumers are not paying for thefull value of the PMS that we are consuming and therefore someone is payingthat cost," he had said.

"As we speak today, the difference is being carried inthe books of NNPC and I can confirm to you that NNPC may no longer be in a positionto carry that burden."

In the letter to the accountant-general, NNPC saidN111.96 billion will be deducted from April 2021 oil and gas proceeds - due tothe federation in May - noting that the deduction is necessary to ensure thecontinuous supply of petroleum products to the nation and guarantee energysecurity.

"The Accountant-General of the Federation is kindlyinvited to note that the average landing costs for Premium Motor Spirit for themonth of March 2021 was N184 per litre against the subsisting ex-coastal priceof N128 per litre, which has remained constant notwithstanding the changes inthe macroeconomic variables affecting petroleum products pricing," the letterread.

"As the discussions between Government and the Labourare yet to be concluded, NNPC recorded a value shortfall of N111.966,456,903.74in February 2021 as a result of the difference highlighted above. Accordingly,a projection of remittance to the federation for the next three months ispresented in the attached schedule."

What This Means ForStates

There has been concern over shortfall in the FAACrevenue for the three tiers of government, with Godwin Obaseki, governor of Edostate, accusing the Central Bank of Nigeria (CBN) of printing N60 billion toaugment the March allocation.

However, Obaseki?óÔé¼Ôäós claim was refuted by Zainab Ahmed,minister of finance, budget and national planning, with Godwin Emefiele,governor of the CBN, describing it as a political ploy that is "unfortunate and totally inappropriate".

The zero remittance from NNPC will affect the monthlyallocation to states for the coming months, which may make them unable to meettheir statutory obligations such as payment of salaries to workers in theirrespective states.

A source, however, told TheCable that the shortfallwill be augmented from the N200 billion saved from previous months.

Rising Oil Prices: TheDouble-Edged Sword For Nigeria

The resurgence in the price of crude oil bodes wellfor the Nigerian economy, as this will boost the country's revenue needed forthe implementation of the 2021 budget, improve crude oil receipts, andconsequently bolster foreign exchange inflows.

However, the prolonged high crude prices willultimately feed into a climb in petrol?óÔé¼Ôäós landing cost - meaning an increase infuel price.

The Petroleum Products Pricing Regulatory Agency(PPPRA), through a petrol pricing template released in March, had announced anincrease in the retail price of petrol. The template announcing the priceincrease was later deleted by the agency.

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The post NNPCSet to Deliver Zero FAAC Remittance in May as Subsidy Payment Bites Harderfirst appeared in TheCable.ng on April 28, 2021.