FAAC meets to discuss subsidies as NNPC deductions threaten state allocations

The Nigerian National Petroleum Company Limited’s anticipated withdrawal of N242.53 billion in gasoline subsidy from the Federation Account this month is causing concern among states as the Federation Accounts Allocation Committee meets on Tuesday (today).

The 36 state finance commissioners are expected to meet today for the monthly allocation sharing meeting between the three levels of government, according to reports.

The NNPC had already informed the states that it will deduct a total of N242.53 billion in March (this month) as the amount paid on Premium Motor Spirit (commonly known as gasoline) subsidy.

Subsidy deductions by the NNPC have often lowered the amount shared by FAAC, putting further strain on state governments’ resources as they struggle to fulfill their responsibilities, particularly salary payments.

When asked about the efforts that states are doing to satisfy their responsibilities and pay wages, David Olofu, Chairman of the Forum of Finance Commissioners, refused to comment, but did say that the FAAC meeting this month will be held on Tuesday.

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He told one of our journalists, “You’re trying to squeeze water out of the rock.”

When asked about the date of the FAAC meeting this month, Olofu, who is also the Benue State Commissioner for Finance, said, “Tomorrow (today, Tuesday).”

States have protested the NNPC’s low payments to FAAC, which were a result of the oil company’s fuel subsidy deductions.

The oil company maintained that the amount will be recovered from February 2022 revenues due for sharing at the March 2022 FAAC meeting, despite the fact that it defined the planned N242.53 billion subsidy reduction for this month as a value deficiency.

“The value deficit recovery on the importation of PMS in December 2021 amounted to N210.38 billion,” it added.

“The recovery comprises of the outstanding value shortfall recovery of N33.9 billion accumulated during the 2021 year, plus the December 2021 value shortfall of N176.48 billion.” The outstanding spot arrears of N98.81 billion as of November 2021 are particularly noteworthy.

“An anticipated value gap of N242.53 billion is to be recovered from February 2022 proceeds due for sharing at the March 2022 FAAC meeting (consisting of N143.72 billion for January 2022 recovery + N98.81 billion in November spot arrears).”

Remember that the NNPC did not send any money to the FAAC in February this year because of its massive fuel subsidy expenditure and consequent withdrawal from the Federation Account.

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State governors slammed the NNPC for not remitting any monies at the FAAC meeting last month on March 3, 2022.

Kayode Fayemi, the Chairman of the Nigeria Governors’ Forum and the Governor of Ekiti State, has also questioned how the oil company could claim profit while failing to satisfy its FAAC duties.

During the Nigerian Governors’ Forum session on natural resources at the Nigeria International Energy Summit 2022 in Abuja, Fayemi and other governors revealed this.

He explicitly said that the NNPC made no payment to the federation at the previous Federation Accounts Allocation Committee meeting in February.
The governor had added, “We recently had the Federation Accounts Allocation Committee meeting a few of days ago, and the NNPC contributed nothing to the Federation Accounts this month.”

Following the NNPC’s zero remittance in February, some states were reported to have found it impossible to pay employees.

According to media sources, the Kano State Government, which had authorized a N30,000 minimum salary for its employees, has returned to the former minimum wage of N18,000.

“Given the current financial condition, the government would find it impossible to execute the consolidated pay for the month of March, which is merely a temporary solution,” State Commissioner for Information Muhammadu Garba is quoted as saying.

In Kogi State, the state government established a new minimum wage for its employees, which resulted in a percentage payout.

Godwin Anya, the State Chairman of the Nigeria Labour Congress in Benue, claimed the state has been paying its employees in installments for some time.

Various oil sector players informed our reporter that until the fuel subsidy scheme was abolished, the NNPC’s deductions would likely continue, given the firm had been Nigeria’s only importer of gasoline for more than four years.

Throughout the years, the oil company has also borne the burden of the gasoline subsidy. The real cost of the product is far greater than the official pump price of N162-N165/litre.

Billy Gillis-Harry, President of the Petroleum Products Retail Outlets Owners Association of Nigeria, said that the true cost of fuel without subsidies was generally somewhat more than that of diesel.

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According to him, if it weren’t for the subsidy, PMS would be selling at N550 to N600 per litre because to the surge in crude prices.

The officially subsidised pump price of PMS in Nigeria is between N162 and N165/litre, however oil marketers claim that if PMS were deregulated, the real cost would be somewhat higher or around the same as diesel.