Hard times loom in states over NNPC’s new status

https://guardian.ng/news/hard-times-loom-in-states-over-nnpcs-new-status/

The Federal Government and the newly constituted Nigerian National Petroleum Company Limited (NNPC) may face legal actions following the transition of the latter to a limited liability company.

Findings by The Guardian showed that the 36 states of the federation and the 774 local councils whose financial viability has been threatened by the development, as the new status of the NNPC means it would no longer contribute to the Federation Accounts Allocation Committee (FAAC), might seek reprieve in court.

The FAAC, usually shared to the three tiers of government monthly, had been under threat lately following huge payment of subsidy on premium motor spirit (PMS) otherwise known as petrol by the NNPC under the old order.

However, the transition of the NNPC to a limited liability company would henceforth permanently halt it from contributing to the FAAC.

The transition of the company has also thrown up fresh issues from the Petroleum Industry Act (PIA), particularly on sections of the Act dealing with the ownership of the NNPC and taxes.

For instance, under Section 53(3) of the Act, ownership of NNPC Ltd is vested in the government, which is defined under Section 318 as the “Federal government of Nigeria,” while chapter four that deals with Fiscal Framework provides that a core objective of the Act is “to establish a framework that expands the revenue base of the Federal Government and not states or local governments.”

The Act also repealed the Petroleum Profits Tax and replaced it with the Nigerian Hydrocarbon Tax (NHT) and Companies Income Tax (CIT); whereas NHT would be subject to 13 per derivation, CIT would not be.

Before the recent transition of NNPC, governors, including Ekiti State Governor, Kayode Fayemi, who doubles as the Chairman of the Governors’ Forum (NGF), had raised the alarm over dwindling FAAC especially as NNPC shifted commitment to the over N4 trillion subsidy budget in the 2022 budget. Thus, the states and local councils have so far survived more with non-oil revenue in the FAAC.

With NNPC now totally off remittances to the FAAC while the Federal Government plans N6.72 trillion petrol subsidy next year, only contributions from the Nigerian Custom Services and the Federal Inland Revenue Services (FAAC) remain certain.

With almost all the states and local councils struggling to pay salaries or maintain their basic operational expenses, the prevailing development meant that worsening financial crisis awaits the states and local councils.

A legal practitioner, Ledum Mitee, stated that the 13 per cent derivation to the oil producing states was under threat in the present circumstance