By Oscarline Onwuemenyi
LAGOS â€”THE Nigeria National Petroleum Corporation, NNPC, said, yesterday, it was unable to pay the N450 billion it owed the Federation Account, stating insolvency as reason.
The Corporation stated its position in a letter to the Federation Account Allocation Commission, FAAC, which was read by Chairman of the Commission and Minister of State for Finance, Mr. Remi Babalola, at the FAAC meeting.
The minister said NNPC also requested for a reimbursement of N1.156 trillion from the Federal Ministry of Finance in order to repay its debt of N450 billion to the Federation Account.
FAAC had at the end of its meeting last month directed that a letter be written to the Corporation to come up with a concrete repayment plan.
Babalola said: â€œAt the close of business, yesterday, my office received a letter signed by the Group Managing Director of NNPC wherein it stated that the Corporation was facing financial difficulties evidenced by, amongst others, the inability to pay for the domestic crude as at when due and delays in settling bills for fuel imports.â€
He said the NNPC explained that the financial difficulties arose from disequilibrium between costs and cash inflow streams, adding that it was owed substantial amounts as un_reimbursed subsidy on petroleum products.
The minister said the Corporation claimed that it was insolvent, with current liabilities exceeding current assets by N754 billion as of December 31, 2008.
He said: â€œNNPC spends increasing sums of money in repairing/replacing vandalized assets and it is suffering from products losses arising from there from.
Also, the cost of holding strategic reserves of petroleum products on behalf of the Federal Government including demurrage on this reserves.â€
Babalola added that the corporation said it was incapable of repaying the N450 billion owed to the Federation unless it was reimbursed N1.56 trillion owed it by the Federal Ministry of Finance, noting:Â â€œIt was finally resolved that we should write to the Presidency to find a final solution to the lingering debt.
What is important is that we resolve this matter, and the Corporation has accepted that it owes this said sum.
â€œAs for the claim by the NNPC that it is owed about N1.156 billion by the Ministry of Finance, we donâ€™t know whether we owe them any money, because we have not audited the Corporation and, therefore, we have not verified the veracity of this claim.
â€œWhen NNPC came out and said that we owe them N1.156 billion, we now decided to appoint auditors to go and audit their accounts; and President Goodluck Jonathan has recently ordered the audit of the oil and gas behemoth, and when the audit is completed we would be able to verify exactly how much the corporation is owed and then find ways of resolving that.â€
The minister added: â€œThe true position of the matter is that NNPC is bleeding. There was a particular month that the NNPC could not pay the money it was supposed to pay into the Federation Account. I mean how can you produce something for N60, for instance, and sell that thing for N40? How can any company survive on that?
â€œThe issue is not about whether they will pay or not, but about whether they are able to pay. This further buttresses the need for full implementation of deregulation as a veritable economic imperative. What is important to FAAC is for NNPC to pay whatever it owes to the Federation Account.â€
Meanwhile, at the FAAC meeting, revenue amounting to N413.277 billion was distributed among the federal, state and local governments, out of a total revenue collection of N607.386 billion in June 2010.
Giving the breakdown, Babalola said that statutory allocation accounted for N361.25 billion of the total revenue distributed as against the N340 billion shared last month, while the Value Added Tax, VAT, was N52.027 billion compared to the previous figure of N40.543 billion.
There was no augmentation from the domestic excess crude account.
The minister said: â€œThe distributable Statutory Revenue for the month is N361.25 billion which shows an increase of N21.119 billion or 6.21 per cent compared to that of May 2010.
The increase was attributable to improved production as a result of re_opening of Trans Forcados, EA Terminals and Nembe Creek trunks line as well as Force Majeure lifted in Brass Terminal.
â€œIn addition, improved tax drive and increase in the volume of import had positive impact. There was no exchange gain and augmentation because the prevailing exchange rate of N147 per US dollar is lower than the N150 benchmark; and the revenue inflow for the month is higher than the monthly approved figure.â€
Out of the Statutory Allocation of N361.250 billion, the Federal Government received N171.679 billion, about 52.68 per cent; States, N87.078 billion, about 26.72 per cent;Â and Local Government Councils, N67.133 billion, about 20.60 per cent.
The 13 per cent derivation accounted for the balance of the statutory allocation of N35.361 billion.
The States got the lionâ€™s share of the VAT distribution of N26.014 billion (50 per cent); closely followed by the Local Government Councils, which received N18.209 billion (35 per cent).
The Federal Government received 15 per cent of the distributable VAT, amounting to N7.804 billion.
Babalola has canvassed the institutionalization of fiscal prudence at all tiers of governance in line with the provisions of the Fiscal Responsibility Act (FRA) 2007.
He disclosed that the fiscal prudence would assist in maintaining macroeconomic stability and also position the economy on a sustainable growth trajectory.
The minister called for the harmonisation of the various economic policies of the tiers of government in order to achieve medium term credibility.
â€œA significant challenge we face is the harmonisation of the various economic policies of the tiers of government. Clearly, the short_term effectiveness of these policies will depend on their medium_term credibility.
â€œTo retain their credibility, exit strategies will be needed to convert fiscal and monetary policies from extraordinary short_term support to sustainable medium_term frameworks,â€ he said.
He told the FAAC members that President Goodluck Jonathan had directed the Department of Petroleum Resources (DPR) to henceforth generate monthly oil production statistics for reconciliation in the second month after the month of data gathering.
This directive, Babalola explained, had become necessary to address the problem of recoveries for overpayment and underpayment to State from the 13 per cent derivation computation due to the lateness in the release of derivation indices.
â€œFurthermore, Mr. President has also directed that the Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC) should ensure that the figures so generated are used for the computation and sent to the Federal Ministry of Finance for revenue allocation by the third month following the initial month of data generation,â€ he revealed.
The monthly Federation Account Allocation Committee (FAAC) meeting, which was attended by Accountant General of the Federation, Alhaji Ibrahim Dankwambo; Director of Home Finance in the Federal Ministry of Finance, Alhaji Gidado Mohammed; and commissioners for finance and accountants_general from the 36 States.