Despite the zero revenue contribution of Nigeria National Petroleum Company Limited (NNPCL) into FAAC’s purse, the three tiers of government still had enough to share in the last eight months, Abdulwahab Isa reports.
The Nigerian federation could flourish independent of oil revenue after all. Glimpses into the federation revenue basket, with nearly one year of Nigeria National Petroleum Company Limited, NNPCL, not remitting oil revenue to the Federation Account Allocation Committee (FAAC) proves a possibility of a flourishing economy devoid of oil revenue. Since January 2022, NNPCL, unlike before, has not paid a dime into FAAC’s purse on the pretext of shouldering oil subsidy provision. In the face of a zero revenue contribution from NNPCL, month in, and month out, FAAC has not wavered. Rather, the committee with a mandate to share the revenue with the three tiers of government in line with the agreed revenue formula routinely meets the monthly obligation.
Oil subsidy harbinger
January 2022 was the beginning and departure from what was for FAAC, a routine schedule. In January 2022, Nigeria National Petroleum Company, hitherto the biggest revenue contributor to the federation purse, came to the FAAC meeting with empty hands. The oil firm’s representative to the FAAC meeting bluntly told bewildered FAAC members how what it realized from the sale of crude oil had been used to import refined petrol for local consumption. Fast forward from January till date, NNPCL has been consistent in deducting whatever it incurs as petrol subsidy cost. Each deduction monthly leaves the firm with a negative balance; and as such, no funds to remit into the FAAC basket. NNPCL’s zero revenue position, without a doubt, unsettled Nigeria Governors’ Forum (NGF). The forum’s immediate past Chairman and Governor of Ekiti State, Dr. Kayode Fayemi, frowned at the development. Speaking at the Governors’ Forum on Natural Energy, Oil and Gas at the fifth Nigeria International Energy Summit (NIES), an infuriated Fayemi said: “The NNPC contributed zero to the federation account last month. This is not the first time. Of course, we know why; though the price of crude oil is going to about $110 per barrel in the international market. “The more it goes up, the more we suffer.” He noted that it was ironic that the NNPC was declaring profit and unable to meet its obligations to the Federation Account Allocation Committee (FAAC). Fayemi said the governors were concerned about how to grow the industry, stressing that transparency, accountability, and governance were critical in achieving this objective. NGF’s position couldn’t deter NNPCL from deducting oil subsidy costs and posting negative returns to FAAC. A progress report on fuel subsidy on Premium Motor Spirit, popularly called petrol, between January and March 2022 showed it cost NNPCL N675.93 billion.
The sum of N671.88 billion was deducted by the oil firm as a subsidy in April 2022. It described the N671.88 billion as a value shortfall incurred by the NNPC. The oil firm is the sole importer of petrol into Nigeria and has subsidized the commodity using billions of naira monthly.
FAAC revenue without NNPCL
FAAC has shared revenue with the three tiers of government, federal, state, and local government councils for a consecutive eight times in a row with zero remittance from NNPCL. In the absence of NNPCL’s contribution, FAAC relied on other revenue sources like Valued Added Tax (VAT), import and excise duties, Companies’ Income Tax, Petroleum Profit Tax, and oil and gas royalties. For eight months (between January to August 2022), FAAC shared N5.6 trillion with the three tiers of government. Findings by New Telegraph showed that despite zero allocation from NNPCL, effective from the beginning of the year, FAAC maintained a surplus revenue position. This is contrary to the expectations of observers. The amount was close to the N5.647 trillion shared within the same period in 2021 and 2020 when the NNPC was the highest contributor to the revenue. Of the N5.6 trillion (January to August 2022) shared, the federal government got the highest amount of N2.2 trillion; the state government received N1.7 trillion, and the local government council’s N1.3 trillion. Aggregated on a monthly basis, in January this year, FAAC approved N574.668 billion for sharing to three tiers of government. Of the amount approved, the federal government got N204.580 billion, states received N179.251 billion and 774 local government councils got N131.878 billion. In February, N590.546 billion was shared by FAAC. Of the amount, the federal government received N236.117 billion, followed by states N190.007 billion and Local government councils N140.612 billion. In March 2022, the total allocation approved by FAAC was N 725.571 billion. The Federal Government, as usual, got the highest allocation of N277.104 billion, states received N227.201 billion, and local government councils N167.910 billion. In April N656.602 billion was the total distributable revenue of which the federal government received N257.611 billion, the state’s share of the revenue was N201.256 billion while local government councils were N149.251 billion. In May, of the N680.783 billion approved, the federal government share was N229.563 billion, states N241.824 billion while the share of local government councils was N175.942 billion. The sum of N802.407 billion was approved in June. Of the amount, the Federal Government got N 321.859 billion followed by the states N245.418 billion and local government councils N182.330 billion. In July, FAAC approved N954.085 billion for sharing to the three layers of the government. The federal government got N406.610 billion, states got N281.342 billion and local government councils got N210.617 billion. 2022, of the N673.137 billion approved, the federal government received N295.461 billion, states got N222.949 billion and local government councils received N164.247 billion.
Non-oil revenue as the magic wand
That Nigeria is richly endowed with varied revenue sources outside oil isn’t doubtful. The country’s untapped revenue sources are in the nonoil sectors such as taxes and the non-oil commodities for export. The Federal Inland Revenue Service (FIRS), which has reformed its taxation processes, has stepped in to fill the vacuum created by dwindling oil revenue. Both FIRS and Nigeria Customs Service NCS in recent years surpassed their revenue targets. In the non-oil export circle, figures from the Nigeria Export Promotion Council (NEPC), and National Bureau of Statistics (NBS) showed the economy is flourishing with minimal contribution from oil revenue. A report by Executive Officer NEPC, Barrister Ezra Yakusak, quoting non-oil export returns from Pre-shipment Inspection Agents (PIAs) for the first half of the year 2022, said non-oil in the period referenced stood at 4,146,534 metric tons and $2.593 billion. Ezra said it translates to a rise of 62.37 percent against a recorded figure of $1.597 billion for the first-half year 2021 and 164.23 percent over the first half of 2020, which was $ 981.442 million.
The agency’s export for survival campaign aimed at sensitizing the general public to embrace non-oil export as a major driver in the diversification of the Nigerian economy with a resultant effect to boost foreign exchange earnings is getting the desired impact. The recent report on export data for the second quarter of 2022 by the National Bureau of Statistics NBS put the value of total export at N7.4 trillion. The value accounted for 57.7 percent of total trade. The export value rose in Q2’22 by 4.3 percent against the level recorded in Q1’22 and by 47.5 percent when compared to Q2’21.15,” NBS said.
Last line
Given the vast resources available in the non-oil sector economic value chain such as taxes, and non-oil export commodities, Nigeria’s economy will do well and prosper in the absence of oil revenue. There can never be any other time than now to give adequate attention to the diversification of the economy to the non-oil sector.
Source - New Telegraph.
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