Revenue crisis to worsen for FG, states as NNPC plans N242.52bn FAAC deduction in March

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Uba Group

BY VICTORIA ONU, ABUJA

The revenue crisis facing the three tiers of government is set to worsen by the end of this month as the Nigerian National Petroluem Company Ltd has notified members of the Federation Account Allocation Committee of its intention to deduct the sum of N242.52bn at the end of March this year.

Notice of the intention to withdraw the amount was conveyed to members of FAAC at its meeting held last week.

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 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 per cent derivation principle.

The NNPC said that the deduction of N242.52bn represents the value shortfall which would be recovered from the revenue proceeds for February which would be shared during the FAAC meeting to be held in the month of March.

The value shortfall, according to documents obtained by THE POINT consists of N143.71bn for the month of January 2022 recovery and November 2021 spot rate arrears of N98.81bn.

The document stated that the December 2021 value shortfall on importation of Premium Motor Spirit also known as petrol amounted to N210.38bn.

It added the recovery consists of December 2021 value shortfall of N176.48bn and the outstanding value shortfall recovery of N33.9bn accrued over 2021 fiscal period.

The NNPC also stated in its document to FAAC that the November 2021 spot arrears of N98.81bn are also outstanding.

The planned deduction is expected to reduce the amount to be shared during the monthly FAAC meeting for March.

“Some states are currently battling fresh economic challenges as a result of dwindling allocation from the federation account which has dropped to a four-year low”

For instance, in January, the Federation Accounts Allocation Committee shared the sum of N574.66bn to the Federal Government, states and local government councils.

The amount shared in January is lower than the N699.82bn disbursed in December 2021.

The N574.66bn total distributable revenue comprised distributable statutory revenue of N291.40bn, distributable Value Added Tax revenue of N178.06bn and Exchange Gain of N5.202bn and Non-Mineral Revenue of N100bn.

Some states are currently battling fresh economic challenges as a result of dwindling allocation from the federation account which has dropped to a four-year low.

The Kano State Government has two days ago said it will resort to use of the April 2021 salary template where some percentage was deducted from state workers’ pay while local government workers were paid the outlawed N18, 000 minimum wages.

While most of the states are struggling to survive, with payment of salary already difficult, things could get tougher with the over N3trn deductions expected this year.

At the International Energy Summit held in Abuja last week, Chairman of Nigeria Governors’ Forum and Ekiti State Governor, Kayode Fayemi, lamented that the NNPC Limited contributed nothing to the Federation Accounts Allocation Committee in February.

“The NNPC contributed zero to FAAC this month. This is not the first time NNPC is contributing zero to FAAC. In the last couple of months, we have been having these challenges,” Fayemi said.

He said it is worrisome that increase in oil price at the international market is creating concerns locally, adding that the governors are concerned about how to sustain the sector for a long time.

Calling for revamp of the oil sector, Fayemi said: “For states that are beneficiaries of the goose that lays the golden egg in the oil and gas industry, we also are very desirous that investments are sustained over the long term.

“We see a serious concern, particularly in terms of revitalising the industry around transparency and around accountability.”

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