NNPC memo: Governors seek end to petrol subsidy

Governors will back withdrawal of petrol subsidy to end fleecing of the country, it was learnt yesterday.

They also opened discussions with the Nigeria National Petroleum Corperaton (NNPC) over the oil giant’s “zero remittance for May” letter.

A governor, who spoke in confidence, told our correspondent yesterday that the Nigeria Governors’ Forum (NGF) was on the same page with the NNPC because “fuel subsidy is a scam”.

The source added: “It is a case of heavens falling. All will be affected and hopefully, we will stop living a lie. We cannot continue with this scam called subsidy regime.

“Certainly, states may back withdrawal of fuel subsidy to have more funds for far-reaching and impactful projects for Nigerians.”

On the NNPC letter, the source said: “We are talking.”

Another governor, said: “Total withdrawal of petrol subsidy is inevitable. It is a reality we have to face as a nation.

“What is being shared from the Federation Account monthly to all the tiers of government is pittance because about N120billion is deducted for subsidy. This amounts to about N1, 3trillion to N1.4trillion annually.

“We are virtually subsidising the petrol being smuggled into neighbouring countries because our fuel consumption is between 55% and 60% of what is pushed out.

“With the subsidy level, about 27 states cannot break even. Instead, states have resorted to borrowing.

“We are already thinking ahead on palliatives which will mitigate the effect of the withdrawal of subsidy.

“The NGF is already talking with the NNPC on zero remittance and withdrawal of subsidy. The Federal Government has also raised a committee on petrol pump price ahead of the withdrawal of subsidy. The NNPC has presented all the indices to the FG-NLC committee.”

But Katsina State Governor Aminu Masari differs.

As far as he is concerned, the zero remittance plan of the NNPC will negatively impact the states and the battle against insecurity.

He told reporters at the Aso Villa after meeting Chief of Staff to the President Prof. Ibrahim Gambari, that “it’s with resources that state and local governments are able to contain some of these restive youths so that they can be used for better purposes because most of them might be foot soldiers for bandits.

“So, I think we have to look at this issue seriously, it will significantly affect even the capacity of states to pay salaries and to do what is necessary for the smooth running of government and fund  the logistic requirements of security agencies.”

The federal government believes that zero remittance from the NNPC into the Federation Account next month will not amount to much.

A source at the Federal Ministry of Finance insisted yesterday that the “NNPC’s projections will not significantly affect FAAC disbursement for May”.

According to the source, “remittances from other agencies into the federation account have surpassed NNPC’s over time”.

“Contributions from the Nigeria Customs Service (NCS), the Federal Inland Revenue Service (FIRS) and remittances from non-oil sources, especially other mineral proceeds, have always been higher than what the NNPC brings to the table.”

The Finance ministry official who is a FAAC member said FAAC had survived past funds denials from NNPC, especially with under-remittance until the Corporation was forced to remit all it was owing.

Asked how this will affect workers’ salaries in the affected months and beyond the zero remittance from the NNPC persist, the official said “there are other strategic accounts the government can withdraw from to augment funds for sharing”.

“Some of the strategic accounts are the Excess Crude Account (ECA) and the Nigeria Sovereign Investment Authority (NSIA).”

Reacting to the development, Prof Uche Uwaleke of Nasarawa State University said, NNPC’s zero remittance “will adversely affect the distributable revenue for the months due largely to rising under recovery costs or petrol subsidy”.

This he said: “Is because the NNPC is a major contributor to that pool. The others are the FIRS, Customs and to a little extent, Ministry of Solid Minerals”.

Prof Uwaleke warned that “this should be of concern to Nigerians, especially civil servants at the state level, given that staff salaries, unfortunately, are either delayed or not paid whenever there is a shortfall in projected revenue. Ditto for contractors handling various projects in states”.

He advised sub national governments “to reprioritise their spending, placing premium on salaries and deferring expenditures that can wait till the situation improves”.

According to him, “these austere times equally call for cutting costs and reducing wastes in government spending”.

The NNPC had written to the Accountant-General of the Federation that “the sum of N111.966,456,903.74 will be deducted from April 2021 Oil and Gas Proceeds due to the Federation in May 2021, which will translate to zero remittance to the Federation Account from the NNPC in the month of May 2021. This is to ensure the continuous supply of petroleum products to the nation and guarantee energy security”.

The NNPC said it arrived at the decision because “the average landing cost of Premium Motor Spirit (PMS) for the month of March 2021 was N184 per litre as against the subsisting ex-coastal price of NI28 per litre, which has remained constant notwithstanding the changes in the macroeconomics variables affecting petroleum products pricing.

“As the discussions between government and the labour are yet to be concluded, the NNPC recorded a value short fall of N111,966,456,903.74 in February 2021 as a result of the difference highlighted above”.

The last two FAAC meetings witnessed major revenue shortfalls.

In April FAAC, though there was an accrued revenue of over N800 billion, the federal government adopted a tough stance the state governments to accept N680 billion as amount to be shared for the month.

The last two FAAC incidences corroborate the NNPC’s claims of sustained revenue decline affecting the federation account.

The Nigeria Labour Congress (NLC) was still awaiting the invitation of the Federal Government on resumption of talks on fuel pump price per litre.

The Petroleum Products Pricing Regulatory Agency (PPPRA), preemptively in March published a new price regime for Premium Motor Spirit.

It said with the new template, fuel was expected to sell at N209.61 per litre and at an upper retail price of N212.61 per litre.