The Nigerian National Petroleum Company (NNPC) has failed to remit money to the federation account despite posting high remittances in taxes.
The Federal Inland Revenue Service (FIRS) records listed the top-performing taxpayers in Nigeria for the year 2021 to include Liquified Petroleum Gas Company Ltd, which was recognized as the Most Supportive Taxpayer, while the NNPC was listed as the Highest Taxpayer.
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Although a positive development, industry analysts are, however, worried that proper deregulation of the petroleum downstream sector must be pursued for greater remittance to the Federation Account.
“In terms of fiscal revenue, 70 per cent of federal government’s revenue comes from oil and gas. Royalties are also huge and quantities of tax paid also huge.
“However, the administration of subsidy regime and oil theft impact on remittances to the Federation allocation,” a former Chairman of the Nigerian Society of Petroleum Engineers, Joe Nwakwue, told the ICIR.
Nwakwue stressed that in terms of tax remittance and production sharing formular (PCS), the government gets huge sums.
“In Production Sharing Contracts, the government gets 50 per cent in that arrangement. Apart from the 50 per cent, there is also the cost of oil and tax oil payments, as well as royalties.
“Deep off-shore payment is huge. This is what the FIRS is saying, but the problem is general petroleum administration in the country, which the PIA is supposed to solve, but we are shifting the goal post,” he said.
The NNPC has for many months registered zero remittance to the Federation Account Allocation Committee, which is money shared by different tiers of government – Federal, State and Local Government.
NNPC’s excuses for the zero FAAC allocation is hinged largely on over-bearing subsidy, which is currently gulping over N4 trillion.
Other causes are poor management of the nation’s refineries, which barely satisfy local petrol consumption, and oil theft, which impacts negatively on government’s revenue.
In addition to this is low oil production as Nigeria has failed to meet the OPEC quota of 1.7 million barrels per day production.
Just recently, poor management of the Nigerian oil sectors had caused Nigeria to be delisted from the JP Morgan list.
JP Morgan said it delisted Nigeria from the market following NNPC’s inability to transfer earned funds from January to March to the government due to petrol subsidies and low oil production.
The American bank announced last week that it moved Nigeria’s debt out of the ‘overweight’ category.
Notably, economic analysts use overweight and underweight to broadcast recommendations on buying or avoiding stocks of certain sectors. Analysts attach an overweight recommendation to a stock that they believe will outperform its sector in the near future.
Economists and industry analysts say the government must hasten the process of implementing the Petroleum Industry Act, which could see it raise money from the Nigerian stock market.
“The government can raise as much as N15 trillion from the stock market because of its huge assets in the oil sector. The borrowing of N4 trillion to fund subsidy is unhealthy to the economy,” a professor of development economist and consultant to the federal government, Ken Ife, said.
Ife said, “If you look at our current debt situation, it can be corrected if we do the right thing in our oil sector.
“The NNPC is supposed to be remitting $3 billion to the CBN but hasn’t done that for long now and we are borrowing N4 trillion to fund subsidy.
“Since January last year, they’ve not remitted to the federation account. You also see JP Morgan delisting us from overweight category. This is not healthy for our economy and it is sending wrong signals to investors.”
He stressed that the federal government must move NNPC to the capital market, float the company and do an assesment of its assets to drive economic growth.
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.