BY VICTORIA ONU, ABUJA
Barring any unforeseen circumstances, the Nigerian National Petroleum Company Ltd will be deducting from the Federation Account, the sum of N50.7bn being the amount spent on subsidising petrol for Nigerians.
The amount to be deducted by the NNPC from allocation to the three tiers of government in January 2022 is contained in the December Report submitted to members of the Federation Account Allocation Committee at its meeting held on December 23, 2021.
The Committee, headed by the Minister of Finance, Zainab Ahmed, is made up of Commissioners of Finance from the 36 states, representatives of revenue generating agencies such as NNPC, Federal Inland Revenue Service, Department of Petroleum Resources, Central Bank of Nigeria, Nigeria Customs Service, among others.
The Federation Account is currently being managed on a legal framework that allows funds to be shared under three major components.
They are the statutory allocation, Value Added Tax distribution; and allocation made under the 13 per cent derivation principle.
Under statutory allocation, the Federal Government gets 52.68 per cent of the revenue shared; State Governments, 26.72 per cent; and Local Governments 20.60 per cent.
The framework also provides that Value Added Tax revenue be shared thus: FG, 15 per cent; States, 50 per cent; and LGs, 35 per cent.
Similarly, extra allocation is given to the nine oil producing states based on the 13 percent derivation principle.
According to an analysis of the document by The Point, the Corporation had been deducting oil revenue to fund the subsidy of petrol to Nigerians in the last 12 months since the 2021 budget did not cater for subsidy payment.
Between January and November 2021, the NNPC subsidised the price of Premium Motor Spirits for Nigerians with the sum of N1.2trn
A copy of the NNPC report which was obtained by The Point showed that the NNPC incurred the sum of N25.37bn on subsidy in February 2021. No amount was spent subsidising the product in the month of January 2021.
The amount moved up to N60.39bn and N61.96bn in March 2021 and April 2021, before hitting N126.29bn and N164.33bn in the months of May and June, 2021.
For the month of July 2021, the Corporation incurred the sum of N103.28bn as subsidy on PMS, while the figure went up to N173.13bn, N149.28bn and N163bn in August, September and October 2021, respectively.
The Federal Government had in the 2021 budget abolished the payment of fuel subsidy as no provision was made for such expenditure.
The under-recovery arose as a result of the price differential between the landing cost and pump price of petrol.
With the deregulation of the downstream sector of the petroleum industry in 2020, the price of petrol had risen from N121.50 to N123.50 per litre in June 2021, to N140.80-N143.80 in July 2021, N148-N150 in August 2021, N158-N162 in September and N163 per litre in November, 2021.
Since November 2020, the price of Premium Motor Spirit popularly known as petrol had remained unchanged despite the increase in crude oil prices in the international market.
As of the time the fuel subsidy was removed in June 2020, the price of crude oil was about $45 per barrel.
But as of Friday, December 31, 2021, the price of Brent Crude had risen to about $79 per barrel. This price is far higher than the 2021 Federal Government budget benchmark price of $40 per barrel.
What this means is that while expectations are high that there would be more revenue to be earned from crude oil sales by the NNPC for the government, the adverse effect would manifest on the imported price of refined products.
The Group Managing Director and Chief Executive Officer of the NNPC Ltd, Mele Kyari, had said in November last year that the subsidy would have been eliminated in 2020 but certain factors prevented it.
He, however, said that the Petroleum Industry Act provides that by the end of February 2022, the nation should be out of the subsidy regime.
“There will be no provision for it legally in our system, but I am also sure you will appreciate that the government has a bigger social responsibility to cater for the ordinary and therefore engage in a process that will ensure that we exit in the most subtle and easy manner,” he said.
Kyari assured that fuel subsidy removal would definitely be achieved in 2022 as it was now fully backed by law, adding that the price of the product may range between N320 and N340 per litre.
The Governor of Kaduna State, Nasir El-Rufai, said state governments are ready to support the Federal Government in the elimination of the fuel subsidy regime.
El-Rufai said that if the regime of fuel subsidy was not eliminated, 35 out of the 36 states of the federation may not be able to pay salaries in 2022.
He said, “This hullabaloo about petrol is something that we must as a country have a conversation and agree that it has to end.
“We cannot continue to provide petroleum to our neighbouring countries, which is what we are doing.
“Why are we doing this? For whom are we doing it? Who is the beneficiary? Which is the cabal that is the beneficiary of this and why should they hold this country to ransom and bankrupt the Nigerian economy?
“Right now, we are losing N250bn a month and this has to end. State governments are committed to supporting the Federal Government on this.
“We do our bit, engage stakeholders and put the facts on the table so that everyone understands the danger the country is in if the subsidy continues, as well as the benefits that will accrue.
“Not only to the budgets of the states and their capacity to deliver social services, but also what will go directly to the pockets of the poorest Nigerians that will bear the brunt of any withdrawal of subsidy.
“This is the position of the state governments and we met just a few days ago to take this position.”
El-Rufai said that the governors saw the dangers in continuing on the path of petroleum subsidy and support policy measures needed to improve the fiscal situation, such as price stability.
