From Ndubuisi Orji, Abuja
The Nigerian Governors Forum (NGF) has said subsidy payments on Premium Motor Spirit (PMS) has affected revenue inflow into the Federal Account even as they raised the alarm that 30 states may not be able to pay salaries in the coming months because of dwindling federal allocation.
The forum, which stated this in a presentation to the House of Representatives adhoc committee probing daily consumption of petrol, accused the Nigerian National Petroleum Company (NNPC) of “arbitrary deduction” from revenues accruable to the Federations Account.
The document, signed by the NGF Head, Legislative Liason, Peace and Security, Fatima Katsina, said net oil and 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 was taken to stem the trend.
“Fiscal pressures are growing unsustainably with the PMS subsidy significantly reducing the flow of revenues into the Federation account. 35 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,” the governors said.
It said in its analysis of the average monthly PMS consumption by states 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 percent of PMS consumption in the Country.
“Most states with high PMS consumption either have borders with neighbouring countries or are in close proximity, this has been an avenue for smugglers to benefit from profitable arbitrage opportunities in PMS pricing.”
“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.”
