The Federation Account Allocation Committee (FAAC) is irked by refusal of the Nigerian National Petroleum Corporation (NNPC) to offset an outstanding sum of $1.7 billion indebted to it by the Nigerian Petroleum Development Company (NPDC), a subsidiary of NNPC. The oil firm, it was learnt, had given commitment to settling the debt, having secured necessary government’s approvals to procure a loan to offset the debt. A FAAC document sighted by New Telegraph over the weekend that captured FAAC members’ position, berated the Nigeria’s oil firm for reneging on payment after several assurances.
“The chairman recalled a report presented at the October 2018 FAAC meeting where NNPC claimed to have obtained the necessary government approvals to procure a loan to offset the outstanding payment of $1.74 billion good and valuable consideration on Shell Petroleum Development Company (SPDC) assets acquired by NPDC. “He noted that NNPC promised to obtain the financial value of the loan by the end of the fourth quarter of 2018,” a FAAC document quoted the Acting Chairman and the Accountant General of the Federation, Mr. Ahmed Idris as saying. In the report, Ahmed alluded that NNPC had made two lightings of 100,000 barrels of petroleum in the name of good and valuable consideration that were due for payment in December 2018. The FAAC boss said NNPC, at the point of lifting crude oil barrels, confirmed the lifting were the option considered by it to start off – settling the $1.74 billion owed by NPDC. The Forum, which held its monthly meeting last week to consider and approve January revenue distribution to three tiers of government, expressed its worry over NNPC fiddling with payment of NPDC’s debt.
“The sub-committee was worried that the option of using 100,000 barrels of crude oil lifting per month would take up to 20 years to settle the NPDC debt. There were still outstanding Royalty and Petroleum Profit Tax (PPT) that NPDC was yet to settle with DPR and FIRS respectively.
“NNPC should come up with concrete and more acceptable option of settling the NPDC debt,” noted the FAAC chairman. It was learnt that a representative of NNPC assured FAAC of the corporation’s commitment to liquidate the lingering debt. “The NNPC representative explained that the cargoes lifting option was a measure to ensure that funds were made available to the federation account from outstanding debt, pending the drawdown from the facility being arranged by the corporation to offset the debt,” the report said. The NNPC representative said the corporation was borrowing the funds from the international financial markets to repay the debt, citing strict conditions attached by the lenders as a major challenge for not repaying the debt on time. Relatedly, FAAC has adopted report by ad hoc committee on benchmark for monthly transfers into Excess Crude Account (ECA), PPT and Royalty account. ECA is a special account established in 2005 to warehouse oil proceeds above the budgeted benchmark. To shield ECA from unrestrained abuse, FAAC in July last year, set up special committee to come up with fresh guidelines guiding ECA operations.
The new guideline stipulates a minimum monthly statutory revenue to be shared from the Federation Account by the three tiers of government at about N680 billion. It recommended that any month where the net distributable revenues available for sharing by the federal, states and local governments from the Federation Account falls below N680 billion, funds should be withdrawn from the ECA to augment the shortfall to at least N680 billion. On the other hand, the net distributable revenue is between N680 billion and N730 billion; the committee recommended that up to N50 billion should be transferred into the ECA as savings. Besides, if the net distributable revenue for the month is between N730 billion and N830 billion, the committee recommended that up to about N100 billion should be transferred to the ECA, or a minimum of N150 billion, if the figure is above N830 billion.