Increase in grants will prevent states from paying salaries - Governors

The Governors Forum of Nigeria lamented that the subsidy on petroleum products, especially Premium Motor Spirit (gasoline), has placed a huge financial burden on the states.

The NGF, which is the umbrella organization for the 36 governors of the federation, all parties combined, made this known in a memo sent to the House of Representatives.

The memo responds to the call for notes from the House Ad Hoc Committee on the Volume of Fuel Consumed Daily in Nigeria, which investigates the actual amount of PMS the country consumes daily.

The memo, which was signed by Fatima Usman Katsina, Head of Legislative Liaison, Peace and Security, NGF, for the Forum Chair, was titled "Conclusions on the volume of fuel consumed daily in Nigeria". dated July 1, 2022 and addressed to the Chairman of the Committee, Abdulkadir Abdullahi.

The Governors referred the House to a November 2021 report by the ad hoc committee of its National Executive Council in liaison with the Nigeria National Petroleum Corporation on the appropriate pricing of PMS in Nigeria, which was chaired by Kaduna State Governor Nasir el-Rufai and had governors from Edo, Jigawa, Ebonyi, Akwa Ibom and Ekiti, as well as the Governor of the Central Bank of Nigeria; Minister of Finance, Budget and National Planning; Accountant General of the Federation, Group Managing Director of NNPC and Permanent Secretary of MBNP.

The memo read in part: "Although the operating environment has deteriorated significantly since the publication of the report, NNPC now consistently reports zero payouts to the Federation Accountant as profit from joint venture, production sharing contract and miscellaneous operations. , the position of the forum remains broadly the same.”

The NGF recalled how the report noted that the "Net Federation Oil and Gas Revenue (FAAC) has been declining since 2019 and is expected to decline significantly in 2022 between N3 billion and up to 4.4 billion naira, unless action is taken now.The memo read: "The following are some of the key findings relating to the volume of fuel consumed in the country:

"Remittances to the Federation Accounts Allocation Committee have continued to decline as NNPC recovers the shortfall quite arbitrarily from crude oil sales revenue from the Federation. The FAAC deductions for the PMS grant are above 2019 levels, even without adjusting for the reduction in the purchasing power of the naira due to inflation and the deterioration of the exchange rate.

"An analysis of the average monthly consumption of PMS by states showed that one-third of the country accounts for more than 65% of PMS consumption. The analysis showed that the following states of Lagos, Oyo, Ogun, Abuja, Delta, Kano, Kwara, Edo, Rivers, Kaduna, Kebbi and Adamawa accounted for 65% of PMS consumption in the country Most of the states with high PMS consumption have borders with countries neighbors or are nearby, this has been a way for smugglers to benefit from profitable arbitrage opportunities in PMS pricing.

"Households directly consume only about 25% of PMS consumed domestically, with the remaining three-quarters consumed by businesses, MDAs, transport operators or smuggled into countries neighbors where the price of PMS is almost three times what it is in Nigeria; and among the PMS consumed by households, the richest 40% of households account for more than three-quarters of the PMS purchased by households, while the bottom 40% of households purchased less than 3% of all PMS sold in Nigeria.< /p>

"Under the current tax regime, remittances to FAAC would continue to decline as NNPC recovers this shortfall from the Federation following the recovery in crude oil prices. . The report recommended a PMS pricing structure that tackles regional arbitrage and PMS smuggling and provides additional revenue to the Federation account. There is a significant market opportunity for additional export revenue streams for Nigeria given price parity with our neighboring countries.

“Privatizing the three government refineries as they are, or after full rehabilitation if affordable and viable, and accelerating the licensing process for modular refineries will reduce government spending recurrent costs for the maintenance of refineries and will increase the country's refining. capacity.”

The governors also noted that there were also economic risks highlighted in the report. "Fiscal pressures threaten Nigeria's recovery as rising prices continue to push millions into poverty," they said.

The memo further reads: "Rising prices are pushing millions of Nigerians into poverty. Rising inflation between 2020 and 2021 is expected to have pushed an additional 5-6 million Nigerians into poverty. poverty Food insecurity is increasing in both...