In a recent media interaction, Governor Emmanuel Uduaghan of Delta State expressed deep concern at the inability of the NNPC to fund the federation account and facilitate payment of monthly allocations to the three tiers of government, especially when crude oil has consistently sold at over $100/barrel in place of the budget benchmark of $79/barrel!
Furthermore, Uduaghan noted that the earlier reported production loss of about 400,000b/day, due to theft and leakages, has since been reduced to less than 100,000b/day, after repairs to vandalized pipelines! “So, where is the money?” the Governor asked in apparent consternation!
However, Tumini Green, NNPC’s General Manager for Public Affairs, responded with a media statement that the NNPC does not owe the federation account after “outstanding subsidy and other associated cost of operation and losses are captured”; nevertheless, she admitted that “Not all revenue collected by NNPC are paid directly into the account for federal allocations with the CBN”. According to her, some are paid into the accounts of other relevant agencies like the Federal Inland Revenue Service and the Department of Petroleum Resources with the CBN!
Notwithstanding, 11 state Governors under the platform of Progressive Governors Forum have dismissed the NNPC’s defence as “escapist, dishonest and contradictory”. The governors therefore, demanded for a statement on total receipts from sale of crude oil, and insisted that NNPC should confirm the total amount paid into the federation account, and state “how much was paid to other relevant agencies and the Federal Accounts Allocation Committee (FAAC).” Furthermore, the governors advised NNPC to clearly specify the amount it had retained internally as subsidy refund for its fuel imports, as well as provisions made for operational costs and losses, as claimed by Green!
Edo State Governor, Adams Oshiomhole also corroborated the concerns of his colleagues and therefore implored the corporation to pay over N2.3tn it allegedly owed the federation account.
According to Oshiomhole, “The truth is that there is financial crisis in Nigeria, which has very serious national security implications ….” In Edo State, like the rest of other 36 states, part of our July allocation has not been paid, about one-third of our August allocations has not been paid, and nothing has been paid for September allocation, and it is the first time since 1999 that this has happened.”
However, in a report in ThisDay’s edition of 6th October (page 11), the Finance and Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala, confirmed that the full balance of N121.1bn for July allocation had finally been fully distributed among the tiers of government; the Minister also noted that “it had taken the Allocations Committee two months to fund July revenue shortfall”.
Paradoxically, such critical fund shortage existed side by side with the burden of systemic surplus funds, which CBN compulsively sought to reduce and thereby forestall inflation, by keeping idle, hundreds of billions of naira, which it borrowed at double-digit interest rates from the banks, with sales of treasury bills! It is equally ironical that these perceived ‘oppressive’ surplus cash (excess liquidity) also existed simultaneously with the readily acknowledged shortage of cheap loanable funds to our beleaguered real sector!!
Furthermore, it is also inexplicable that despite the resultant socioeconomic hardship caused by late payment of salaries and contractors’ bills, and the threat to implementation of the 2013 budget, the Finance Minister still sequestered and kept idle, over $3bn credit balance in an excess crude account with little or no yield, while CBN sustained its questionable borrowing spree!
Indeed, both Oshiomhole and Uduaghan seem to believe that NNPC has shortchanged the federation account, as they argue that so long as crude output remained above 80 per cent of budget benchmark, while price remained consistently above $100/barrel; (i.e. over 25 per cent of projected budget benchmark of $79/barrel), the output deficit should be more than compensated for, by the handsome price!
In this event, what could then be responsible for NNPC’s inability to meet its revenue obligations to the government? In her defence, Tumini Green insists that after its cost of operations and the fuel subsidy refunds internally absorbed are captured in its statements, NNPC does not owe the federation account any outstanding amount! Nonetheless, the Governors queried the legality of NNPC settling its subsidy refunds internally before remitting any surplus to the federation account!
In reality, private sector oil marketers may have claimed over N800bn in subsidies for their supply of about 30 to 40 per cent of total fuel imports this year; conversely, however, there is no substantive statement of subsidy payments to NNPC for the corporations’ supply of over 60 per cent of domestic fuel requirements!
Consequently, NNPC could attribute a large percentage of the alleged payments shortfall of N2.3tn to subsidy claims internally directly accommodated in 2013 and previous years! Nonetheless, even if this is so, according to Oshiomhole, NNPC still has a duty to explain the “arithmetic” for its 455,000b/day allocation for refining locally; Oshiomhole observes that “Since the NNPC barely refines 100,000b/day; the question, therefore, is what happens to the balance of 355,000b/day?” Since the Accountant General, the Auditor General, the Finance Minister and the CBN have all remained reticent on this matter, only a comprehensive, transparent forensic audit will answer this question. Nonetheless, what is clear is that in place of about N1tn budgeted this year, the consolidated fuel subsidy payments to NNPC and other marketers may well exceed N2tn (i.e. about 40 per cent of 2013 budget)!!
Another critical issue is whether or not constitutional provisions exist to support NNPC’s style of funding the federation account. The Governor’s forum insists that Section 162(1) of the 1999 Constitution clearly specifies that, with the exception of the proceeds of National Income Tax of members of the security forces, “The federation shall maintain a special account to be called the federation account, into which shall be paid all revenue collected by the government of the federation.”
Consequently, the Governors, therefore, insist that if any other Act or Bye Law empowers NNPC to do otherwise, such Act would be contradictory, and that other law will remain null and void.
Ironically, despite the clear provisions of Section 162, the Governors’ Forum has however, refused to acknowledge the reality of CBN’s blatant contravention of the same Section 162(1) with the apex bank’s unilateral substitution of naira allocations for the federation’s distributable dollar revenue; certainly Section 162(1) does not confer such powers on the CBN, neither does it recognise the CBN’s fraudulent accumulation of over $40bn self-styled own reserves, existing outside the consolidated federation account! The Governors, however, probably do not really care because, this illegal payment system liberally funds their own fiscal impunity!
SAVE THE NAIRA, SAVE NIGERIANS!!
By LES LEBA