Economic Confidential, June 12, 2009

NEWS

FAAC Endorses Probe of NNPC’s N1.15 trillion Subsidy Claims

…Insists CBN Must Refund 1% Charges on Paris Club Debt Exit

The Federation Account Allocation Committee (FAAC) which has representatives from each estate and Federal Capital City, Abuja has endorsed an independent audit of subsidy claims by the Nigerian National Petroleum Corporation (NNPC) estimating at N1.155 trillion by the Federal Government.

The Committee, which met at the monthly Fedeeration Account Meeting in Abuja also insisted on the refund of one per cent charges on Paris Club debt exit payments by the Central Bank of Nigeria .

Minister of State for Finance and FAAC Chairman, Mr. Remi Babalola, who confirmed the outcomes of the meeting to journalists, also disclosed that the sum of N329.08 billion was shared by the three tiers of government from revenue realised in May 2009, an increase of N11.61 billion over the preceding month’s figure.

Babalola explained that the government through the Federal Ministry of Finance would verify the NNPC’s subsidy claims and would make payment on genuine claims in order to assist the corporation to refund the N450 billion owed the Federation Account.

He said, “The Committee has resolved that the Corporation should review its cash flow and make a proposal for the consideration of FAAC on how it intends to repay the amount outstanding against it to the Federation Account.

“You will also recall that the corporation made some claims against the Federal Government, the resolution of which our repayment is contingent.

“We have asked the NNPC to forward their claims against the Federal Government to the Federal Ministry of Finance for verification by independent auditors. Arrangements are currently on-going in the NNPC to resolve this matter as soon as possible.”

The Group Managing Director of the NNPC, Mr. Sanusi Barkindo, had while appearing before the FAAC members on May 14, agreed that the corporation owed the Federation Account N450.39 billion.

He, however, noted that the corporation borne the cost of subsidy on petroleum products estimated at N1.15 trillion.

On the one per cent charge on Paris Club debt exit, Babalola disclosed that the Federal Ministry of Finance would write the CBN on the FAAC’s decision that the money should be refunded.

 “The Central Bank of Nigeria responded to a letter from the Committee directing the apex bank to refund the one per cent charged on the Paris Club debt exit. The members of the committee rejected CBN’s reason to hold unto the money and have directed that the money should be refunded,” he said.

A communiqué signed by the Accountant General of the Federation, Alhaji Ibrahim Dankwambo, indicates that N258.186 billion was realised into the Federation Account from mineral and non-mineral revenue while N41.07 billion came in from Value Added Tax.

The three tiers of government shared N329 billion made up of statutory allocation of N255.011 billion, Value Added Tax of N41.071 billion and domestic excess crude augmentation of N33.003 billion.

The Federal Government received the lion’s share of the statutory allocation of N121.041 billion (about 52.68 per cent) from the May 2009 revenue, an increase of N26.754 billion over the preceding month’s receipt.

The States and Local Governments got statutory allocations of N61.394 billion (26.72 per cent) and N47.332 billion (20.60 per cent), compared with N47.824 billion and N36.870 billion paid in April 2009.

The 13 per cent derivation accounted for the balance of the statutory allocation of N25.244 billion, which is to be shared by the oil producing states of Abia, Rivers, Delta, Ondo, Bayelsa, Edo , Imo and Akwa Ibom States .

For the five per cent Value Added Tax, the states got the largest disbursement of N20.535 billion (50 per cent), while the Federal and Local Governments accounted for N6.161 billion (15 per cent) and N14.375 billion (35 per cent), respectively.