Experts have recommended ways the Government at all levels should engage to improve on revenue generation.
Their comments are coming as the Nigerian National Petroleum Corporation, NNPC, said that it will not remit money into the federation account in the month of May due to costs incurred from subsidy payments on petrol.
The NNPC made this known in a letter written to the Accountant-General of the Federation, where it explained that it recorded a value shortfall of N111bn in February 2021.
The shortfall, the NNPC said, will affect its contributions to federal allocations to states for April and May.
Experts are of the opinion that the action will have negative impact on the nation’s economy as Nigeria relies on oil receipts for most of its monthly expenses including workers’ salaries.
The NNPC explained that the decision becomes necessary in order to bridge the gap between the landing cost and ex-costal price of petrol, ensure the continuous supply of petroleum products to the nation, and guarantee energy security.
The letter which was dated April 26 was signed by NNPC Chief Financial Officer, Umar Isa. Those copied in the letter include the Minister of Finance, Budget, and National Planning; the Director General, Nigeria Governors Forum; the Director Home Finance; and the Chairman, Commissioners of Finance Forum.
“The Accountant General of the Federation is kindly invited to note that the average landing cost of Premium Motor Spirit (PMS) for the month of March 2021 was N184 per litre as against the subsisting ex-coastal price of N128 per litre, which has remained constant notwithstanding the changes in the macroeconomics variables affecting petroleum products pricing,” the NNPC said.
“As the discussions between Government and the Labour are yet to be concluded, NNPC recorded a value short fall of N111,966,456,903.74 in February 2021 as a result of the difference highlighted above. Accordingly, a projection of remittance to the Federation for the next three months is presented in the attached schedule.
“Accordingly, the AGF is invited to note that the sum of N111,966,456,903.74 will be deducted from April 2021 Oil and Gas Proceeds due to the Federation in May 2021, which will translate to zero remittance to the Federation Account from NNPC in the month of May 2021.”
Reacting, the Director General, of the Lagos Chamber of commerce and Industry, LCCI, Mr. Muda Yusuf sees the unfolding scenario as quite troubling.
These are consequences of the perpetuation of an unsustainable subsidy regime, Yusuf argues adding that if the NNPC becomes completely incapacitated because of the burden of funding subsidy, the implications for states, and local government would be very dire.
Continuing he said “The social and economic systems of many states and local governments would be at risk of complete collapse. Infrastructure spending will suffer serious setbacks across all levels of government, payment of salaries will be a challenge, fiscal deficit may escalate and debt sustainability issues would be aggravated.
It is thus imperative to come up with a creative and innovative exit strategy from the subsidy regime.:
He pointed to the fact that collecting taxes and fees is a fundamental way to generate public revenues that make it possible to finance investments in human capital, infrastructure, and the provision of services for citizens and businesses.
The collection of taxes and fees is a key development priority, they opined because it is essential to finance investments in human capital, infrastructure and the provision of services for citizens and businesses, as well as to set the right price incentives for sustainable private-sector investment.