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NNPC proposes N114.3bn deduction from June remittance to FAAC as petrol subsidy bites harder

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Nigeria’s three tiers of government may have to look elsewhere to augment revenues accruing monthly from the Federation Account Allocation Committee (FAAC) as the Nigerian National Petroleum Corporation (NNPC) is set to make another N114.2 billion deduction from oil revenues in June to pay for petrol subsidy.

A document from the Ministry of Finance, Budget and National Planning, detailing the NNPC’s presentation to the committee, which took place between June 22 and 23, indicated that as earlier reported, the corporation, which has continued to shoulder the payment of what it calls under-recovery, deducted N126.2 billion from FAAC for May.

What the NNPC has termed under-recovery is the difference between the actual market rate of petrol and the price at which the commodity is sold at the pump, which the federation bears in order to keep the pump price stable at N162 per litre.
However, whereas it made zero contribution to the Federation Account in April, which was shared in May, the national oil company managed to remit about N29 billion from its finances to the joint account in May cycle, which was distributed among the three tiers last week.

For January to May’s funding performance, the data showed that under-recovery or subsidy claims deducted from oil revenues by the NNPC amounted to N25.374 billion in February, N60.396 billion in March and N61.966 billion in April. But it rose astronomically to N126.298 billion in May before falling to N114 billion in June.

These implied that the deduction by the NNPC more than quadrupled from the N25.374 billion in February to N114 billion in June.
This development has justified the clamour for the full deregulation of the downstream sector of the oil and gas industry to allow market forces to determine the price of petrol.

However, the NNPC remitted a marginal net sum of N29.647 to FAAC in May, which was shared in June, as opposed to its zero contribution in April, its N90.860 billion in January, N64.161 billion in February and N41.184 billion in March.
To date, according to the document, the NNPC has been able to contribute a net sum of N225.852 billion to the federation for the year, out of its yearly projected remittance of N1.473 trillion and monthly value addition of N122.7 billion, leaving a variance of N820.684 billion.

The presentation, signed by Mr. Bello Abdullahi, on behalf of the NNPC’s Chief Financial Officer (CFO), Mr. Umar Ajiya, showed that the N50 billion, which is part of the corporation’s financial obligations to its Joint Venture (JV) partners, meant to have been subtracted from the latest round of deductions remains pending.

Gross revenue from JV crude, gas and other receipts for May was N320.314 billion, less royalty of N58.3 billion, JV cost recovery of N124 billion, Profit Before Tax (PBT) of N104.4 billion, to yield a profit after-tax value of N33.26 billion.

The document showed that for April, crude oil and gas sales and receipts, available in May and shared in June, the volume of export crude oil stood at 2.78 million barrels with a monetary value of $181.191 million and equivalent of N69.360 billion, while domestic crude oil due in July was 6.63 million barrels and sold at $434.8 million. Added to export crude oil, the revenue generated was $616.037 million.

NLNG feedstock gas was 27.605 MBTU valued at $38.5 million or about N16.011 billion while the total oil and gas sales stood at $654.601 million or roughly N85.3 billion, according to the corporation.

In May, export crude oil receipt was $167.7 million, about N64.2 billion, NLNG feedstock gas amounted to $34.31 million, the equivalent of N13.17 billion, while the gas company’s paid arrears stood at N623.4 million, to hit a total of N77.96 billion for the receipt from oil and gas for the month.
All the transactions were hinged on N382.80 to one dollar exchange rate as advised by the Central Bank of Nigeria (CBN), according to the national oil company.

The report said: “The sum of N126,298,457,944.36 was deducted as value shortfall resulting from the difference between the landing cost and ex-coastal price of PMS (petrol) recorded in April 2021.
“In addition, May value shortfall of N114,337,097,352.49 is to be deducted from June federation proceeds in July 2021 FAAC meeting. Also, the balance of March 2021 value shortfall of N50,000,000,000.00 remains outstanding.”

It stated that the overall NNPC crude oil lifting of 9.42Mbbls (export and domestic crude) in April 2021 recorded 23.59 per cent increase relative to the 7.62MbbIs lifted in March, while Nigeria maintained 1.4 million bpd Organisation of Petroleum Exporting Countries (OPEC) production cut in April 2021.

“Crude oil export revenue received in May 2021 amounted to $167.72 million, equivalent to N64.2 billion. Domestic gas receipts in the month were N2.9 billion. Feedstock valued at $38.56 million was sold to Nigeria LNG during the period, out of which $34.32 million was received during the month, the difference being Modified Carry Agreement (MCA) obligations, gas reconciliation and credit notes.
“The sum of $16.53 million, being miscellaneous receipts, gas and ullage fees and interest income was received in May 2021,” it stated.

A total loss of 4.527 million barrels of crude was recorded during the month due to shut-ins, repairs, leaks, power outages as well as shutdowns due to protests as a result of non-payment of community workers’ salaries in Batan station and Olomoro, Uzere and Kokori.

Other issues resulting in shutdowns included seawater pump trips, technical issues like high gas to oil ratio or production deferment due to vessel swap.
Of the government ‘calendarised’ priority projects worth $2.680 billion, given a $536 million monthly budget, the NNPC stated that it had so far funded the projects by $636.472 million from January to May.

The document showed an outstanding balance of $1.464 billion in JV cash call arrears to International Oil Companies (IOCs) as of May 31, with the NNPC having offset $3.22 billion from a total negotiated debt of $4.689 billion.

The national oil company told FAAC that it spent N2.263 billion on security and maintenance, N1.580 billion on pipeline and other facilities repairs as well as the payment of a “strategic holding” of N304.183 million, totalling N4.148 billion in May.
In addition, it spent N4.412 billion on national domestic gas development, N3.91 billion on gas infrastructure development, N659 million on crude oil pre-export inspection agency expenses, N3.2 billion on frontier exploration services and N196 million on renewable energy development.

Besides, the corporation said it expended N5 billion on export financing, N8.3 billion on the non-functional refineries and N83.3 billion on the ongoing Nigeria/Morocco pipeline.

Depot price of fuel remained at N128, while 1.885 billion litres were imported and landing cost for the 35 import vessels that brought in fuel ranged from N185.17 to N199.90.
Last week, NNPC told the nation that Nigeria now loses about 42 million litres of petrol to smuggling through the country’s borders, increasing Nigeria’s estimated daily consumption of 60 million litres to 103 million litres.

With the menace now gaining more momentum and illegal dealers more daring, the national oil company stated that the under-recovery or the subsidy that the government pays on the product every month has begun to hover between N140 billion to N150 billion.
The development has made the corporation unable to contribute to the national coffers, as the subsidy it pays has kept wiping out the little gains made from rising international oil prices, which has now exceeded $75 per barrel.

Speaking when he met with stakeholders, including the leadership of the Economic and Financial Crimes Commission (EFCC), Department of State Service (DSS), Nigeria Customs Service (NCS) and chief executives of agencies in the petroleum ministry, Group Managing Director of the corporation, Mallam Mele Kyari, said smuggling had gone beyond what the NNPC could handle.
He stated that with the current exchange rate, the pump price of petrol should be N256 per litre, adding that if the NNPC was to sell at the going rate, and incorporating the current exchange rate, fuel would be selling for about N256 a litre.

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Former Ogun First Lady celebrates 96th birthday

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Mama Lucy Onabanjo, wife of the first civilian Governor of Ogun State, the late Chief Victor Olabisi Onabanjo (Aiyekooto) celebrated her 96th birthday on Tuesday.

Lucy Onabanjo is the oldest surviving former first lady.

Born in Ijebu Ode on October 26, 1925, Mama Onabanjo was trained as a teacher.

It was after her training as a teacher that Lucy started dating the Late Bisi, who was working with a local newspaper called Gaskiya Tarfi Kobo (Truth is more than a Kobo).

Few months after meeting Bisi , she walked down the aisle and said “I do.”

The humble ceremony would blossom into a life of civil service from teaching to the Government House, Abeokuta and beyond.

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It’s illegal to pay petrol subsidy from federation account, Sanusi tells FG

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Former Emir of Kano, Alhaji Muhammad Sanusi II, has said the federal government is indulging in illegality by paying petroleum subsidy from the federation account.

The former Central Bank of Nigeria (CBN) governor spoke virtually as a panelist on Sustainable Development Goals (SDGs) at the just concluded Nigerian Economic Summit held in Abuja.

He also said the Nigerian daily oil consumption data is suspect thus there is endemic corruption in fuel subsidy payments.

“This money coming from petrol belongs to the federation account, and the federal government doesn’t have the constitutional right to pay subsidy on behalf of the federation.

“So it is a fundamental constitutional issue because this is money that should go to the federal, states and local governments. Yet money that belongs to the federation is carried out as federal government expenditure. So, there are so many complex issues, legal and economic issues. We need to stop these issues” he said.

He also advocated for the end of fuel subsidy and electricity subsidy, saying the money saved should be invested in critical sectors like education and health adding that the long-term gains far outweigh the short-term pains.

“I have said this before even as a CBN Governor under the previous government. What I say is not of a particular government. Take petroleum subsidy.

“In 2015 or 2016, Minister Ibe Kachukwu said Nigerian was importing 30 million litres of PMS per day after eliminating corruption. In 2019, the NNPC said we are importing 59 million litres per day after oil prices have gone up. And I have been asking the question, what happened between 2015 and 2019 that our oil consumption has almost double?” he asked.

He noted that “this is what also happened under the previous government. When oil prices go up, NNPC said they are importing more because of the arbitrage. Thus, when the oil prices go high, there is an incentive to inflate the number” he noted.

On electricity tariff, he said it should also be stopped as even poorer countries are paying cost reflective tariffs and enjoying uninterrupted electricity.

The Chairman, the Nigerian Governors Forum and the Governor of Ekiti State, Mr. Kayode Fayemi, also agreed that subsidy payments had to end for resources to be free up for critical investments.

He also said that the government must focus on education and healthcare provision.

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PHOTOS: South-west govs visit Tinubu

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