Governors of the 36 states of the federation under the aegis of the Nigeria Governors’ Forum (NGF) yesterday told Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mr. Mele Kyari, to ensure the continued implementation of earlier agreements reached with President Muhammadu Buhari on transparent remittances to the Federation Accounts Allocation Committee (FAAC).
The governors, at a meeting in Abuja with Kyari, said the maintenance of the agreements was imperative for transparency, accountability and to serve as buffers from fiscal shocks for states.
Over the years, the governors have had a running battle with successive leadership of the NNPC over alleged under-remittances to FAAC, leading to the storms at FAAC meetings where statutory revenues from the Federation Account are shared among the three tiers of government, federal, states and local governments.
On some occasions, the president had to intervene to calm frayed nerves. Such interventions have led to agreements between the parties on how remittances should be made to the Federation Account by NNPC, which collects revenues from oil sales and oil royalties on behalf of the federation.
Ekiti State Governor, Dr. Kayode Fayemi, who doubles as the NGF chairman, also pushed for some accountability measures during the meeting just as he called for a review of the current fuel subsidy regime.
He said: “Working with Mr. President, we had resolved that the collection and remittance of oil royalties should be returned to the Department of Petroleum Resources (DPR) as stipulated under the Petroleum Industry Law. Similarly, the collection and remittance of the Petroleum Profit Tax (PPT) should be returned to the Federal Inland Revenue Service (FIRS) in line with extant laws.
“It was in this vein that Mr. President directed that a revised revenue remittance template should be developed jointly by NNPC, the Ministry of Finance, Office of the Accountant General of the Federation and Revenue Mobilisation Allocation and Fiscal Commission.
“Going forward, a major direction for the forum is to identify options that will help stabilise revenues from oil. We need to consider options to determine a ‘revenue trend’ that corresponds to the long-term trend of exports and that will be enough to stabilise government budgets.”
He said in 2017, the then minister of finance had estimated that a minimum amount of N700 billion must be generated and shared by FAAC monthly to the three tiers of government to enable them to meet up with their obligations of salary payment, statutory transfers and debt servicing.
“We would like our team to work with the corporation to develop a realistic revenue forecasting model for oil revenues. This will help state governments plan appropriately to mitigate, to a large extent, the recurring fiscal shocks we experience.
“It is also important to highlight that subsidy remains a major drawback on government revenues. We may need to consider a new deal on how governments will absorb the cost of subsidy. This has become necessary given the new reality of low oil revenues and rising government commitments.
“We believe that at the current course, subsidy costs will continue to offset any recovery in the oil market. The country recorded one of its lowest cost of subsidy in 2016 when oil traded at an average of $48.11 per barrel. Total subsidy that year was around N28.6 billion; but the amount rose to N219 billion in 2017 and N345.5 billion by mid-2018, as the price of oil and domestic petrol consumption rebounded,” the governor added.
According to Fayemi, these are important considerations for the governors as they have direct implications on energy security and economic stability in the country.
He said NGF partnership with NNPC remained critical to it because it was integral to the fiscal stability of both the federal and sub-national governments, given the central role oil revenues play in funding budgets.
“The growth and stability of the oil industry has a significant bearing on our plans – we have recorded a period where monthly allocation from the FAAC reached as high as N1.1 trillion (June 2014), and in another month in May 2016, the three tiers of government shared just over N289 billion.
“Besides the fall in oil price and production, some of the challenges that have compounded instability in the market include the impact of cash call obligations and the accumulation of liabilities; crude oil theft/losses with about 200,000 barrels of crude oil per day lost to oil theft, while about 500,000 barrels per day is deferred in production shut-ins; and the existing regulation for Production Sharing Contracts (PSCs), which grossly limits government royalties and tax revenues. These are ongoing issues we must work to resolve,” the NGF chairman stated.
In his response, Kyari pledged a continued cooperation with the governors as well as increased revenue for the country.