Subsidy: FAAC meets as NNPC deductions threaten states’ allocations

Agency Report
Agency Report
Group Managing Director of NNPC, Mele Kyari

The planned deduction of N242.53bn fuel subsidy from the Federation Account this month by the Nigerian National Petroleum Company Limited is raising uncertainty among states as the Federation Accounts Allocation Committee is scheduled to meet on Tuesday (today).

It was gathered that commissioners for finance from the 36 states would meet today for the usual monthly allocation sharing meeting by the three tiers of government.

Already, the NNPC had made it known to the states that it would deduct a total of N242.53bn in March (this month) as the amount spent on the subsidy of Premium Motor Spirit, popularly called petrol.

Subsidy deductions by the NNPC had often reduced the amount being shared by FAAC, piling pressure on the finances of state governments as they battle to meet their obligations especially payment of salaries.

When contacted to tell the efforts which states were making to meet their obligations and pay salaries, the Chairman of the Forum of Finance Commissioners, David Olofu, declined comment, but stated that this month’s FAAC meeting would hold on Tuesday.

“You are trying to squeeze water from the rock,” he told one of our correspondents.

When probed further on the date of this month’s FAAC meeting, Olofu, who is also Benue State Commissioner for Finance, replied, “Tomorrow (being today, Tuesday).”

States had kicked against the poor remittances by the NNPC to FAAC, which had been due to fuel subsidy deductions by the oil company.

Although it described the proposed N242.53bn subsidy deduction for this month as a value shortfall, the oil firm stated that the fund would be recovered from February 2022 proceeds due for sharing in the March 2022 FAAC meeting.

It said, “The December 2021 value shortfall recovery on the importation of PMS amounted to N210.38bn.

“The recovery consists of December 2021 value shortfall of N176.48bn plus the outstanding value shortfall recovery of N33.9bn accrued over the 2021 year. The November 2021 spot arrears of N98.81bn is also outstanding.

“The estimated value shortfall of N242.53bn (consisting of N143.72bn for January 2022 recovery plus November spot arrears of N98.81bn) is to be recovered from February 2022 proceed due for sharing at the March 2022 FAAC meeting.”

Recall that in February this year, the NNPC had remitted no money to FAAC due to its huge fuel subsidy spending and subsequent deduction from the Federation Account.

On March 3, 2022, state governors lambasted the NNPC for not remitting any funds at last month’s FAAC meeting.

The Chairman of the Nigeria Governors’ Forum and Governor of Ekiti State, Kayode Fayemi, had also wondered how the oil firm was bold enough to declare profit when it had not been meeting its FAAC obligations.

Fayemi had disclosed this alongside other governors during the Nigerian Governors’ Forum session on natural resources at the Nigeria International Energy Summit 2022 in Abuja.

He specifically pointed out that in the last Federation Accounts Allocation Committee meeting in February, the NNPC made zero remittance to the federation.

“We’ve just had the Federation Accounts Allocation Committee meeting a couple of days ago and the NNPC contributed zero to the Federation Accounts this month,” the governor had stated.

Several states were reported to have found it difficult to pay salaries in February following the zero remittance from the NNPC in that month.

Going by media reports, the Kano State Government which had approved the minimum wage of N30,000, was reported to have reverted to the old minimum wage of  N18,000 for its workers.

The State Commissioner for Information, Muhammadu Garba, reportedly said, “Given the present financial situation, the government would find it difficult to implement the consolidated salary for the month of March, which is though a temporary measure.”

Also in Kogi State, the state government which had also approved the new minimum wage for its workers was reported to have resulted to percentage payment.

In Benue, the State Chairman of the Nigeria Labour Congress, Godwin Anya, said the state had for some time resulted in a staggered payment of salaries to its workers.

Various oil industry operators told our correspondent that unless the fuel subsidy regime was halted, the deductions by the NNPC might continue, as the company had been the sole importer of petrol into Nigeria for more than four years running.

The oil firm had also been shouldering the cost of subsidy on petrol all these years. The actual cost of the commodity is far higher than the approved N162-N165/litre pump price.

The President, Petroleum Products Retail Outlets owners Association of Nigeria, Billy Gillis-Harry, explained that the actual cost of petrol without subsidy was usually a little higher than that of diesel.

He stated that if not for the subsidy, PMS would be selling around N550 to N600/litre going by the rise in crude price.

The approved subsidised pump price of PMS in Nigeria is between N162 to N165/litre, but oil marketers stated that the actual cost should be a little higher or about the same price of diesel had it been PMS was deregulated.

The PETROAN president further stated that the N3tn that was projected by the government as subsidy spending in 2022 might double before the end of the year if the crude oil price continues to rise.

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