FEDERATION ACCOUNT: Stakeholders Move to Stop NNPC from Collecting, Remitting Oil Royalty… FAAC to probe N90bn underpayment by FIRS

To check the controversy associated with the Nigerian National Petroleum Corporation (NNPC) remittances into the Federation Account, stakeholders in the Federation Account Allocation Committee (FAAC) are moving to stop the state oil company from collecting and remitting royalties accruing from oil.

FAAC has also unveiled plans to probe the N90 billion allegedly underpaid into the Federation Account by the Federal Inland Revenue Service (FIRS).

The move, largely championed by the states, represented in FAAC by the commissioners for finance is considered a potent way of checking the recent frequent deadlocks at FAAC meeting occasioned by the rejection of NNPC remittances.

Controversies surrounding alleged under-remittance by NNPC had culminated in five inconclusive FAAC meetings this year alone-three of them occurring between June 27 and July 12.

FAAC membership comprises minister of finance (chairman), commissioner for finance of each state in the federation; two persons  appointed by the president,  the Accountant-General of the Federation, and the permanent secretary in the Federal Ministry of Finance or such officer as may be designated by the  minister shall be the secretary to the committee.

The Chairman, Commissioners for Finance Forum, Mr. Mahmoud Yunusa, disclosed in an interview in Abuja at the weekend that part of the move to put in place a more credible process was to strip the NNPC of the power of collecting oil royalty and transfer same to the Department of Petroleum Resources (DPR) while the Federal Inland Revenue Service (FIRS) handles Petroleum Profit Tax (PPT) as was the practice in the past.

Yunusa also alleged that the amount, which the FIRS paid into the Federation Account in May, showed a decline of about N90 billion, adding that the committee would probe the underpayment.

“Part of the process of strengthening the system will be to take the collection and remittance of royalty from NNPC to the Department of Petroleum Resources (DPR) while the collection and remittance of PPT will also be returned to the FIRS in line with the law.

“This is part of the process that we are trying to strengthen and adopt. It is there, it is part of the law under oil and gas, like in any other IOC (International Oil Company), that all royalties should be collected and remitted to the Federation Account by the DPR. It is DPR’s responsibility. Before DPR collects that, it has to make sure that the actual amount that is supposed to be remitted is remitted.

“If it is under-remitted, the DPR will be responsible for the shortfall, and I know DPR would not want to be responsible for a shortage that they are not even aware of.

“If you are supposed to remit X billion naira, and you remit B billion naira to them, they won’t accept because it is under-remitted. The royalty is calculated and paid based on the oil lifted, the same thing with PPT.

“The NNPC has to remit the same amount that has to be remitted to FIRS, if not, the FIRS will not accept because they would not want to be responsible for the shortfall or under-remittance that ordinarily they shouldn’t be responsible. So that will balance the revenue collecting system.

“There should be a kind of checks and balances. Had it been we had this, this issue wouldn’t have cropped up. That is the system we are trying to strengthen and adopt,” he said.

On whether royalty and PPT are the only two issues the federation account was looking at addressing, Yunusa answered in the affirmative, adding: “If you are running a company and then you see that you are having a kind of bumps, potholes on the way and a lot of things are not very clear to you, you could expand the horizon of your checks. But for now, we want these two to be addressed and respected.

“If the NNPC remits its royalty and remits its PPT, it can’t come to FAAC and say we are contributing zero amount to the federation. If they say they are contributing zero and may be they get away with it that month, the following month would it come and say it is contributing zero?

“Their conscience will not allow them. Let’s even assume they have the guts to do it the second month, how long will it continue? But don’t forget both the first and second month, we are getting our royalty and PPT intact, but what is its own worth of doing business? What value has that added to the Federation Account and what value have they added to Nigeria?” Yunusa queried.

On why FAAC meetings were cancelled three times in a row, Yunusa said: “We thought we had concluded our reconciliation where whatever that we have put forward to government based on our projections is supposed to have been solved so that we can have FAAC, and then we move on. But due to some other issues, the government was not able to get the desired attention it was supposed to have gotten in respect of the process we said it should be followed.

“However, from the feelers that we have gotten, the top management of the NNPC is out of the country for a meeting; by the time they return, all these things will be put in order. It’s just fair that if such decision should be taken, it should be in a joint session that will involve the Governor’s Forum, the Ministry of Finance, the NNPC as well as the Forum of Finance Commissioners. We are on course towards solving all the problems and we are focus,” he stated.

On the issue of hiring a forensic auditors and consultants to work with the NNPC as suggested by FAAC in March, Mahmoud said: “We are on course, but we want to take these problems one after the other. NNPC is not the only revenue generating agency in the country but NNPC is having this much attention because it is the major driver of revenue; all the tiers of government rely to some extent, on the revenue that is driven from the centre and the major contributor of that revenue from the entre is NNPC and we can’t afford not to fix whatever problem we see or we presume is there in NNPC,” the chairman of finance commissioners forum said.