Dwindling Revenue: We’ll Not Be Able to Pay Salaries In Coming Months — Govs

The 36 state governors have raised the alarm that they may not be able to pay salaries in the coming months as a result of dwindling revenue from the federations account.

The Governors under the auspices of the Nigerian Governors Forum (NGF) expressed their concern in a presentation before the House of Representatives ad-hoc committee investigating the daily consumption of the premium motor spirit (PMS) in Nigeria.

NGF Head of Legislative Liaison, Peace and Security, Fatima Usman-Katsina, accused the Nigerian National Petroleum Company (NNPC) Limited of arbitrary deduction from revenue accruable to the federation account as well as the dwindling fortune of remittances to the federal coffers.

Usman-Katsina said FAAC net oil and gas revenues have been declining since 2019 and were projected to decline significantly in 2022 by between N3 billion and up to N4.4 billion unless action was taken urgently.

She said: “Although the operating environment has significantly worsened since the report was released, with NNPC now consistently reporting zero remittance to the federation accountant as profit from joint venture (JV), production sharing contract (PSC) and miscellaneous operations, the position of the Forum remains generally the same.

“The report had noted that FAAC net oil & gas revenues have been declining since 2019 and are projected to decline significantly in 2022 by between N3 billion and up to N4.4 billion unless action is taken now.”

She further said the NGF findings revealed that remittances to FAAC have continued to shrink as NNPC recovers shortfall ‘quite arbitrarily’, from the federation’s crude oil sales revenue.

“An analysis of the average monthly PMS consumption by states showed that a third of the country accounts for over 65 per cent consumption of PMS. The analysis showed that the Lagos, Oyo, Ogun, Abuja, Delta, Kano, Kwara, Edo, Rivers, Kaduna, Kebbi and Adamawa accounted for 65 per cent of PMS consumption in the country.

“Households directly consume only about 25 per cent of the PMS that is consumed nationally, with the remaining three-quarters being consumed by firms, MDAs, transport operators or smuggled to neighboring countries where the PMS price is nearly three times what it is in Nigeria.

“Of the PMS consumed by households, the richest 40 per cent of households account for over three-quarters of the PMS purchased by households, while the poorest 40 per cent of households purchased less than three per cent of all PMS sold in Nigeria.

“In the current fiscal regime, remittances to FAAC would continue to shrink as NNPC recovers this shortfall from the Federation as a result of crude oil price recovery. The report recommended a PMS pricing structure that addresses regional arbitrage and smuggling of PMS and provides additional revenue to the federation account.

“There is a significant market opportunity for additional export revenue streams for Nigeria to be given the price parity with our neighbouring countries.

“Privatisation of the three government refineries will reduce the recurring government expenditure on refinery maintenance and increase the country’s refining capacity. There were also economic risks highlighted in the report. Fiscal pressures are threatening Nigeria’s recovery, as rising prices continue to push millions into poverty,” she said.

The NGF further estimated that rising inflation between 2020 and 2021, was expected to have pushed an additional 5.6 million Nigerians into poverty.

The forum said, “Fiscal pressures are growing unsustainably with the PMS subsidy significantly reducing the flow of revenues into the federation account. Thirty-five out of 36 states are likely to see transfers from the federation fall (in nominal terms) between 2021 and 2022, with the average decline projected to be about 11 per cent.

“Most states are already experiencing fiscal stress, with 30 out of 36 states recording fiscal deficits in 2020, including Lagos and every oil-producing state except Akwa Ibom.

“With the projected decline in gross distributable federation revenues in 2022, fiscal deficits and debt burdens will grow even larger and faster. This will mean that transfers from the federation will not be enough to cover even salaries, and certainly not recurrent costs, which are growing in nominal terms.

“With the coming into effect of the Petroleum Industry Act, gross oil and gas revenues could be (much) lower than currently projected because of the new fiscal terms and the earmarking of deductible revenues specified in the PIA, and that could reduce net oil and gas revenues even further.”

Also, in a document submitted to the committee, the Nigeria Customs Service put the total volume of PMS imported into the country between 2015 and June 2022 at about 2,380,814,974.418 metric tonnes in 3,703 vessels, while 876,801,931.515 metric tonnes of PMS in 1,296 vessels were exported within the period.