*Stakeholders push for increased IGRs Tougher times await federal, states and local governments as subsidy on premium motor spirit (PMS) is set to erode over N7.7 trillion from the Federal Allocation Account by December this year. Already, the debt profile of states is rising ahead of the implementation of the N70,000, with some stakeholders…
Stakeholders push for increased IGRs
Tougher times await federal, states and local governments as subsidy on Premium Motor Spirit (PMS) is set to erode over N7.7 trillion from the Federal Allocation Account (FAAC) by December this year.
Already, the debt profile of states is rising ahead of the implementation of the N70,000 minimum wage, with some stakeholders saying that the three tiers of government will have to borrow more or adjust their fiscal positions given the prevailing situation.
While the Nigerian National Petroleum Company (NNPC) Limited, on Monday, released its audited financial statement for 2023, claiming profits of N3.3 trillion and dividends of N2.1 trillion, which should strengthen the fiscal position of the government, the payment was insufficient to clear subsidy debt of N4.7 trillion, which is projected to hit N7.7 trillion by December.
The country may need the entire N6.7 trillion profits made by the state oil company in the last four years under the current Group Chief Executive Officer of NNPC, Mele Kyari and an extra N1 trillion to clear the debt.
In comparison, the NNPC records the lowest profit among its peers. Aramco declared $121.3 billion in 2023; Brazil’s Petrobras reported $24.88 billion; National Oil Corporation of Libya made $21 billion; Sonatrach of Algeria made $7 billion, while Angola’s Sonangol earned $3.4 million as profit.
A former President of the Chartered Institute of Bankers of Nigeria (CIBN) and professor of economics at Babcock University, Segun Ajibola, said challenges are ahead not only for the sub-national government but also the federal government, which is facing serious fiscal challenges.
Ajibola insisted that the country’s refinery must begin to work, adding that the prevailing importation is eroding the foreign exchange crisis.
Some stakeholders feared that the lower tiers of government may be at loggerheads with the Federal Government over the use of the dividends to offset subsidy as it remains unclear if the federal and the sub-national governments are in agreement on the issue.
This is especially true as the prevailing weak oil production threatens to worsen the fiscal crisis, widen the revenue and expenditure gap as well as thwart efforts to generate N6.23 trillion in oil revenue this year.
While Tinubu said subsidy is not being paid on PMS, the Minister of Finance and the Coordinating Minister of the Economy, Wale Edun, who had disclosed that subsidy in 2024 alone would stand at N5.4 trillion, said the NNPC asked for a refund of N4.71 trillion from the Federal Government to cover outstanding debts used to import petrol into the country.
Going by the explanation of Edun, petrol subsidy averages N500 billion monthly and stands at N4.7 trillion as of June this year.
The value may rise to N7.7 trillion by the end of the year. The amount is N1 trillion higher than the N6.7 trillion the state oil firm has made in the last four years.
Subsidy debt, broken down on a month-by-month basis, shows that an outstanding balance of N1.18 trillion increased to N1.24 trillion in August 2023 and N1.3 trillion in September 2023.
It was N1.51 trillion in October 2023. By November, the figure increased by N570 billion to N2.08 trillion and by another N550 billion to N2.63 trillion in December 2023. The figure increased to N3.19 trillion in January 2024, N3.29 trillion in February, N3.55 trillion in March and N4.02 trillion in April after which it ballooned to N4.29 trillion in May. In June, it went up to N4.71 trillion. If it continues to expand at its current speed, it could close the year at N7.7 trillion by December.
Currently, the Ministry of Finance Incorporated and the Ministry of Petroleum Incorporated hold the shares of NNPC in equal portions for Nigeria.
Renowned energy expert, Prof. Wunmi Iledare, said the profit relative to NNPC’s annual budget leaves much to be desired in comparison to other national companies worldwide Iledare noted however that it was commendable that NNPC is not running at a loss despite the significant financial burden it carried on behalf of the Federation and the Federal Government in particular in 2023.
SOURCE: Guardian Nigeria
