Governors under the auspices of the Nigeria Governors’ Forum (NGF), have described as unsustainable, Nigeria National Petroleum Corporation (NNPC) continuous payment of oil subsidy to marketers.
They further described it as a drain on the country.
Recalled that the Eighth Senate had expressed reservations over the payment of N11 trillion in six years to fuel importers under the subsidy regime.
Chairman of the Forum and Governor of Ekiti State, Dr. Kayode Fayemi, who led a delegation of the NGF on a courtesy call on the new Group Managing Director of the Nigeria National Petroleum Corporation (NNPC), Mr Mele Kyari, solicited for greater prudence, accountability and transparency from the Corporation.
He stressed that subsidy remains a major drawback on government revenues, hence the need to consider a new deal on how governments will absorb the cost of subsidy. This he said has become necessary given the new reality of low oil revenues and rising government commitments.
According to Fayemi, “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 US$48.11 pb. 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 PMS consumption rebounded.These are important considerations for us, with direct implications on energy security and economic stability in the country.”
The NGF chairman said that having known Kyari, after meeting him while he (Fayemi) was minister of Mines and Steel, and having worked with him and seen his perspectives and visions for the country, he believes that he is a man of integrity who would deliver on his promises to the nation.
He said: “Over the last few years, the Forum has built a working relationship with the corporation on matters related to the size and distribution of oil revenues in the country. Both organisations have held series of engagement meetings to discuss ways of addressing challenges bedeviling the oil industry.
“This partnership remains critical to us because it is integral to the fiscal stability of both the federal and sub-national governments, given the central role oil revenues play in funding our 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 Federation Account Allocation Committee (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.
“But in addition to these, we have also pushed for a number of accountability measures. 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 Mobilization 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.
“In 2017, the 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 meet up with obligations of salary payment, statutory transfers and debt servicing.
“But more can be done. 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.
“We would like to see beyond these areas too, including new partnerships for investments across States and knowledge transfer for our people through research and strategic events.”
In attendance at the meeting were Aminu Waziri Tambuwal of Sokoto State, the Director General of the NGF, Asishana Okauru, the NGFs Senior Economist David Nabena and the Head, Media and Public Affairs, Nigeria Governors’ Forum Secretariat, Abdulrazaque Bello-Barkindo.