Despite zero remittance by the Nigerian National Petroleum Company Ltd, (NNPC), the Federal Accounts Allocation Committee disbursed a total of N1.99 trillion in the first quarter of 2022.
This is coming on the heels of heavy borrowing by the federal government to the tune of N39 trillion as well as revenue generation challenges.
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A breakdown by Daily Trust of the Federation Accounts Allocation Committee (FAAC) from January to March 2022 showed that a total of N574.668 billion was shared in January 2022 among the federal government, states and local government councils.
The amount comprised distributable statutory revenue of N291.400 billion; distributable Value Added Tax (VAT) revenue of N178.066 billion and Exchange Gain of N5.202 billion and non-mineral revenue of N100.000 billion.
In January 2022, the total deductions for the cost of collection was N 25.421 billion, and the total deductions for statutory transfers, refunds and savings was N92.767 billion.
In February, federal, state and local governments shared the sum of N695.033 billion as federation allocation by the Federation Accounts Allocation Committee (FAAC), for the month of February 20222.
Out of the N695 billion, gross revenue available was N177.873 billion, compared to N191.222 billion in January, while the federal government received the highest allocation of N239 billion from a total sum of N695.033 billion shared.
“From this stated amount, inclusive of Gross Statutory Revenue, Value Added Tax (VAT), Non-Mineral Revenues and Excess Bank Charges, the federal government received N236.177 billion.
“The states received N190.007 billion, the Local Government Councils (LGs) got N140.612 billion, while the oil-producing states received N23.750 billion as derivation (13 per cent of Mineral Revenue),” the communique at the end of the meeting stated.
Statutory Revenue of N429.681 billion received for February was higher than the sum of N396.432 billion received in January by N33.249, as Petroleum Profit Tax (PPT) increased significantly, while Oil and Gas Royalties increased marginally, with Import and Excise Duties, Companies Income Tax (CIT) and Value Added Tax (VAT) all recording considerable decreases.
Similarly, a total sum of N725.571 was shared as FAAC allocation among the three tiers of government in March 2022.
The N725.571bn total distributable revenue comprised distributable statutory revenue of N521.169bn and distributable Value Added Tax (VAT) revenue of N204.402bn.
The total deduction for the cost of collection was N44.411bn and the total deductions for statutory transfers, refunds and savings was N382. 826bn.
Out of N725.571bn; the federal government received N277.104bn, states received N227.201bn and local government councils received N167.910bn while a total of N53.356bn was shared to the relevant states as 13 per cent derivation revenue.
Out of the N521.169bn distributable statutory revenue, the federal government received N246.444bn, states received N125.000bn and local government councils received N96.369bn.
In the month of March 2022, the gross revenue available from the VAT was N219.504bn. This was higher than the N177.873bn available in the month of February 2022, by N41.631bn.
The sum of N6.322bn allocation to NEDC and N8.780bn cost of the collection were deducted from the N219.504bn gross VAT revenue, resulting in the distributable VAT revenue of N204.402bn.
From the N204.402bn distributable VAT revenue, the federal government received N30.660bn, the states received N102.201bn and local government councils received N71.541bn.
Zero remittance from NNPC
Meanwhile, in the three months under review, The Nigerian National Petroleum Company (NNPC) contributed nothing to the federation account, with under-recovery being the excuse for non-remittance.
The NNPC at its monthly presentation at the last FAAC meeting said it could not remit any revenue generated into the federation as it was used to pay for fuel subsidies.
From January to March 2022, the NNPC has expended a total of N675.93 billion on fuel subsidy payments.
NNPC says it has also deducted N245.77 billion for petrol under-recovery costs in March.
In January, February and March 2022, fuel subsidies consumed 210.38 billion, N219.78 billion, and N245.77 billion, respectively.
NNPC announced that it will also deduct N671.88 billion (under-recovery outstanding) from its remittance to FAAC for April, which is due to the federal government in May.
The said amount comprises the previous month’s outstanding and part of the February 2022 value shortfall.
“The estimated Value Shortfall of N671,882,996,685.81 (consisting of N519 billion for estimated April 2022 recovery plus N152 billion of March 2022) is to be recovered from April 2022 proceed due for sharing at the May 2022 FAAC Meeting,” NNPC said.
In January, February and March 2022, fuel subsidies consumed 210.38 billion, N219.78 billion and N245.77 billion, respectively.
Subsidy payment may lead to more borrowing – Experts
However, experts believe that the rising subsidy payment may lead to more borrowing for Nigeria.
Reacting to the development, Senior Economist with SPM Professionals, Mr. Paul Alaje says that huge subsidy payment is a red flag as it will pile up the country’s debt profile which is nearing N40 trillion
“Already the World Bank has cautioned Nigeria on subsidy payment, noting that it may be too expensive to maintain in the long run and we have already earmarked N4trillion which was approved by the national assembly for new borrowings to pay subsidy.
The situation is becoming worrisome and the more we borrow, the more we surrender all our revenues to servicing, especially borrowing to pay petroleum subsidies,” he said.
On the solutions, he said “The federal government needs to reconsider the suspension of the PIA as it provides an avenue for huge investments and contributing meaningfully to Gross Domestic Product”
Also speaking, an economist, Musa Shuaibu said fuel subsidy payment has reached N600 billion in the first quarter of 2022 because of the rising prices of crude oil, which is now two times the amount benchmarked in the 2022 budget.
He added, “Oil prices have been climbing higher almost on a daily basis since Russia invaded Ukraine and the price has now averaged $110 per barrel. The implication is if we don’t refine crude in Nigeria; as such, we will need to pay more for subsidies as the price increases. Also, since the federal government does not have enough revenue to pay for the rising landing cost of petrol, they are left with no option than to borrow,” Shuaibu added.