States may face more cash crunch, following the transformation of the National Petroleum Corporation (NNPC) to NNPC Limited – a private concern.
The unveiling of the oil giant appeared to have signaled its severance from monthly contribution to the Federation Account Allocation purse.
It was learnt that in preparation for the take-off of the new NNPC, the corporation had stopped remitting funds to the Federation Account for sharing by the Federation Account Allocation Committee (FAAC).
But governors are not happy with the new ownership structure in which the 36 states of the federation have no stake.
In line with the Petroleum Industry Act (PIA) 2021, the transformed NNPC Limited was incorporated by the Corporate Affairs Commission (CAC) in September 2021 but the Federal Government signed off its commencement and unveiled the company on July 19th, 2022.
According to the PIA, NNPC is expected to conduct its businesses on commercial terms as enshrined in the country’s Companies and Allied Matters Act (CAMA).
Investigation showed that the states may likely bear the brunt of the new NNPC structure because PIA has exited it from contributing to the Federation Account where the states get funds on monthly basis.
States will now draw monthly funds from the remittances into the Federation Account by the Federal Inland Revenue Service (FIRS) the Nigeria Customs Service (NCS), Petroleum Profit Tax and royalties which oil firms pay directly into the Federation Account.
It was gathered that governors are unhappy that the states will no longer derive direct benefit from NNPC as the case in the past 43 years.
Findings confirmed that governors were shocked that there is no provision in PIA for equity or shareholding in NNPC for all the 36 states and the Federal Capital Territory.
A governor, who spoke in confidence, said: “Most states may face liquidity challenge because limited funds are to be shared by FAAC. This is of concern to governors. When resources are dwindling, states will not be able to provide basic services not to talk of employment.
“Except for June, the funds available to the Federation Account Committee (FAAC) have been reducing because NNPC is no longer remitting cash to the account.
“As a matter of fact, NNPC has not contributed a farthing to the Federation Account in the last six months.
“What we receive from FAAC could barely pay salaries of workers. States are now forced to secure loans to carry out impactful projects for the masses. This means, we incur more debts.”
Records obtained by The Nation revealed the breakdown of funds disbursed by FAAC as follows: January 2022 (N179.251 billion); February 2022 (N190.007 billion); March 2022 (N227.201 billion); April 2022 (N201.256 billion); May 2022 (N241.824billion) and June 2022 (N802.407 billion).
It was learnt that the governors have been demanding equity in the new NNPC Limited.
Another governor added: “By the provisions of the 1999 Constitution, all the resources of the country, including the oil which NNPC manages, belong to the Federal Government, all the states of the Federation and the Federal Capital Territory (FCT).
“As the PIA 2021 is, only the Federal Government seeks to benefit from NNPC as a commercial enterprise. The ownership of all shares in the incorporated NNPC is vested with the government, and the Ministries of Finance and Petroleum shall hold the shares on behalf of the government. The shares are not transferable.
“States have no equity and they cannot get returns from the management of the nation’s oil resource. We saw it coming and we cried out. The Nigerian Governors Forum (NGF) actually recommended that since the corporation is owned by the three tiers of government, the new incorporated entity (NNPC Limited), the only vehicle that ‘holds the interest of the three tiers of government’ is the Nigeria Sovereign Investment Authority (NSIA). Allowing the Ministries of Finance and Petroleum is lopsided.
With the PIA, most states will continue to try to survive. It is like placing states on life support.
He said: “We are already engaging the Federal Government on the exclusion of states from NNPC shareholding. We have two choices of either going to court or by seeking amendment to PIA 2021 in the National Assembly.”
