- Tinubu forms committee to address NNPC-FAAC remittances dispute
- DMO cautions FG not to borrow more
At its meeting yesterday, the federal Account Allocation Committee (FAAC) distributed N786.161 billion to the three tiers of government as federal allocation for the month of May 2023.
According to Stephen Kilebi, Director, Press and Public Relations of the Federal Ministry of Finance, Budget, and National Planning, the Federal Government received N301.889 billion from the stated amount, inclusive of Gross Statutory Revenue, Value Added Tax (VAT), Electronic Money Transfer Levy (EMTL), and Exchange Difference, states received N265.875 billion, Local Government Areas received N195.541 billion, and oil producing states received N22.855 billion as derive.
FAAC reported at the meeting’s conclusion that the gross revenue available from VAT for May was N270.197 billion, an increase over the N217.743 billion distributed the previous month.
From that figure, N10.808 billion was set aside for collecting charges, while N7.782 billion was set aside for transfers and refunds. The remaining N251.607 billion was divided among the three levels of government, with the Federal Government receiving N37.741 billion, states receiving N125.804 billion, and LGAs receiving N88.062 billion.
As a result, the Gross Statutory Revenue of N701.787 billion collected for the month was greater than the sum of N497.463 billion obtained in April 2023. From that amount, N26.831 billion was set aside for collecting costs and N155.411 billion for transfers and refunds.
The N519.545 billion leftover balance was distributed as follows: The federal government received N261.686 billion, states received N132.731 billion, LGAs received N102.330 billion, and oil extraction received N22.798 billion.
In addition, N14.969 billion from the Electronic Money Transfer Levy (EMTL) was distributed to the three levels of government in the following manner: The federal government received N2.155 billion, the states received N7.185 billion, the local government authorities received N5.030 billion, and the cost of collection received N0.599 billion.
Petroleum Profit Tax (PPT), Companies Income Tax (CIT), Oil and Gas Royalties, Import and Excise Duties, and VAT all rose dramatically, but EMTL fell little.
While the balance in the Excess Crude Account (ECA) is $473,754.57 as of June 22, 2023, the Nigerian National Petroleum Corporation Limited (NNPCL) did not deposit funds into the federation account.
President Bola Tinubu has established an inter-agency group to resolve the continuing dispute between the NNPCL and FAAC in order to shore up the country’s income base.
According to a Presidency source, “Mr President has approved the memo from NNPC to set up a committee to reconcile the crisis between NNPC and FAAC over the failure to remit money into the federation account.”
According to a White House source who spoke on the condition of anonymity, entrenched interests told the president things that were not totally true, prompting the national oil corporation to demand that the situation be handled once and for all.
“Because we want the public to know the truth, NNPC management wrote to the President to investigate the matter, and Mr President has graciously approved that an inter-agency committee be set up to investigate and reconcile the matter,” an industry source said.
FAAC had accused NNPC of shortchanging it on several occasions by refusing to pay over N2 trillion to the federation account from crude sales, royalties, and taxes, while NNPC claimed that the Federal Government owed it over N4 trillion in subsidy payments, power debt, and other sundry charges.
The committee, which is due to begin meeting today at the Ministry of Finance, is tasked with resolving the controversies surrounding the Federal Government’s N4.2 trillion debt to NNPC and the N2.1 trillion that NNPC is reported to have failed to remit to FAAC.
The Nigerian Upstream Regulatory Commission (NUPRC), Federal Inland Revenue Service (FIRS), Office of the Accountant General of the Federation (OAGF), and FAAC Post-Mortem Sub-Committee are also members of the debt reconciliation committee, in addition to the Ministry of Finance and NNPC.
The President formed the committee in response to a communication dated June 13, 2023 from the Group Chief Executive Officer of NNPC, Mele Kyari, pleading for him to intervene in the case.
MEANWHILE, the Debt Management Office (DMO) has issued a cautionary note to the Federal Government, saying that 73.5 percent of this year’s revenue will be needed to service debt. This high Debt Service-to-Revenue ratio, according to the DMO, is unsustainable and threatens debt sustainability.
The DMO advised FG to prioritize revenue generation in order to establish a sustainable Debt Service-to-Revenue ratio. It proposed increasing the estimated FGN revenue from N10.49 trillion to over N15.5 trillion. These recommendations were provided after an examination of the country’s debt profile in 2022.
According to DMO’s study, the Total Public Debt-to-GDP ratio is expected to rise to 37.1 percent in 2023, owing mostly to fresh borrowings, the FG’s Ways and Means (W&M) at the Central Bank of Nigeria (CBN), and predicted Promissory Notes issuance.
While the baseline scenario implies that the debt stock is still manageable, borrowing space has been restricted in comparison to the self-imposed debt ceiling of 40%.
Due to low revenue, the estimated FGN debt service-to-revenue ratio of 73.5 percent for 2023 surpasses the suggested level of 50 percent. This emphasizes the critical need for the government to considerably raise its revenue. To control the rate of public debt increase, the DMO emphasized the necessity of following to existing legislation on government borrowing, such as the Fiscal Responsibility Act 2007 and the CBN Act 2007.
Furthermore, the DMO emphasized the importance of revenue mobilization measures and reforms in order to boost the country’s tax revenue to GDP ratio. It also proposed enlisting the private sector to help fund infrastructure projects through Public-Private Partnerships (PPPs) and decreasing borrowing through the privatization or sale of government assets.
Experts have backed the DMO’s warning against more borrowing, pointing out the precarious nature of the debt service-to-revenue ratio. They emphasized the importance of fiscal discipline, adhering to borrowing limitations, and implementing revenue-generating measures.
The DMO’s warning serves as a reminder of the difficulties created by Nigeria’s massive debt load. It emphasizes the significance of adopting long-term revenue generating initiatives as well as smart fiscal management in order to ensure long-term debt sustainability and economic stability.