For Second Month Running, NNPC Fails to Make Remittance to Federation Account

For Second Month Running, NNPC Fails to Make Remittance to Federation Account

*Paid N219.7bn as fuel subsidy in February, set to deduct N328bn next month

Again, the Nigerian National Petroleum Company (NNPC) Ltd., failed to remit its statutory funding of the Federation Account, a joint pool collectively operated by the federal, state and local governments in February.

The situation portrays a deepening inability of the national oil company to meet its obligations to its biggest stakeholder, the federation, with the planned N328 billion deduction scheduled for next month, arguably the highest since it began the payment of petrol subsidy.

In addition, the document detailing the National Oil Company’s (NOC) presentation to the Federation Account Allocation Committee (FAAC) on Tuesday, indicated that it had so far exceeded its subsidy budget by N356.3 billion to hit N430.165 billion in January and February.

While the initial projection of subsidy payment for the month was N36.893 billion and annual disbursement of N442.7 billion, since the federal government had planned to withdraw the under-recovery payments by June, however, data from the NNPC indicated that it almost exhausted its entire budget for the whole year in the first two months of 2022.

Whereas the NNPC was supposed to have paid the federation about N351.9 billion this year, it had only succeeded in remitting zero naira to the three tiers of government at February, according to the March presentation.

It also did not fund many of its hitherto mandatory cost centres, during the month under review, including the non-functional refineries, which it spends close to N10 billion on every month, the Nigeria/Morocco pipeline, frontier exploration services, among others.

“The value shortfall of N219,783,148,011.13 was charged for the month which comprises of N195,975,376,910.12 for January 2022 plus part of the November 2021 spot cargo arrears of N23,807,771,101.00.

“The estimated value shortfall of N328,004,248,900.01 (consisting of N253,004,248,900.01 for February 2022 recovery plus balance of November 2021 spot cargo arrears of N75,000,000,000.00 is to be recovered from the March 2022 proceed due for sharing at the April, 2022 FAAC meeting,” NNPC stated in the document.

Despite the rising international prices of oil, in January also, the NNPC in the same manner failed to remit its usual funding to the joint account.

This would be the third time in less than a year that the company would be unable to deliver a kobo to the joint account, following the same occurrence in April last year, when the firm announced zero remittance for the month.

In January, the NOC expended a whopping N210.38 billion on petrol subsidy during the month, although the 328 billion planned  for next month remains the hugest amount yet.

It was recalled that with a  deficit of approximately N2 trillion out of its projected N2.511 trillion, the NNPC was unable to remit roughly 80 per cent of its projected contribution to the Federation Account in 2021.

For the entire 12 months of last year, the NNPC disbursed just N542 billion as against the budgeted N2.511 trillion, given a monthly contribution forecast of N209.3 billion.

The N542 billion represented about 21. 6 per cent of the total expected contribution of the company to the joint account.

The development underscored how a combination of factors, including declining oil production, rising subsidy payments and high oil production costs, have hobbled the organisation’s performance, despite the increasing oil prices which almost hit $140 per barrel a few days ago.

Earlier in the year, President Muhammadu Buhari backtracked on the planned full deregulation of the downstream sector, including the wholesale removal of petrol subsidy, citing the negative impact it would have on the poor in the country.

For decades, Nigeria’s attempt to fully free the downstream oil and gas industry has met with a brick wall. The latest effort has also been pushed forward by about 18 months, effectively exempting the current administration which will exit by May 2023 of any subsidy removal burden.

The analysis in January 2022  had shown that total deductions for petrol subsidy or what the government terms under-recovery was about N1.43 trillion for 2021.

However, the latest data from the FAAC meeting further stated that the overall NNPC crude oil lifting stood at 9.94 million barrels for export and domestic crude, a 22.26 per cent increase relative to the 8.13 million barrels lifted the previous month.

In addition, the NNPC document showed that Nigeria recorded 1.39 million bpd oil production during the month as crude oil export revenue received in February 2022 amounted to $2.73 million.

Furthermore, domestic gas receipts in the month was N13. 10 billion, while feedstock gas receipt was nil.

Also, the sum of $15.42 million, being miscellaneous receipts, gas and ullage fees and interest income was received in February 2022, while the sum of N266,527,887,255.56 was the gross domestic crude oil and gas revenue for the month of February , 2022.