Nigeria’s finance minister Kemi Adeosun, says that proper accountability of the proceeds from oil to the country’s excess crude and stabilisation accounts must be reconciled by the Nigerian National Petroleum Corporation (NNPC).
Given the current oil price and the quantity produced, FAAC’s expectations from NNPC as proceeds to its federation account fell short of the $80.6 million accrued to the federation account in May 2018.
Adeosun, who was giving a brief to the National Economic Council (NEC) at its 89th meeting explained that the unreconciled expectations was the cause of a deadlocked meeting between the Federation Account Allocation Committee (FAAC) and the Excess Crude Account (ECA).
“We operate NNPC as a business. We have invested public capital in that business and we have expectations of return and when that return falls lower than our expectations then the owners of the business, which in this case is the Federal Government and States, need to act,” Adeosun said.
She explained that the figures proposed by the NNPC for FAAC were unacceptable, because some of the costs couldn’t be justified “and so we have decided that rather than approve the accounts, we will go back and do further work”.
Giving an argument on the importance of being prudent, the finance minister noted that the current increase in the price of oil, Nigeria’s main source of income is a prerequisite to save against a rainy day. You may recall that Okonjo Iweala, Nigeria’s immediate past finance minister had blamed the 2016/2017 Nigerian recession on depleted reserves and squandered savings.
“Now that the oil price is $76 per barrel in the spot market, which means that bonny light is about $78, we want to aggressively set aside money in the excess crude account. So, we are very very conscious that this period, this window of relatively high oil price might not last and we would like to be able to save. If we cannot get into the federation account the sort of revenues we are expecting then we will not be able to save,” Adesoun said.
The need to save was equally underscored by all the Governors who want action taken and have given full support of the positions of the federal ministry of finance and the commissioners of finance not to approve the accounts until further explanations on some of the cost being implemented are gotten from the NNPC says Adeosun.
Delayed salary payments in state governments is a direct implication of the non-reconciliation and un-approval of the proceeds remittance, Adeosun warned, she however noted that further negotiations and interactions with the support from state governors and the federal government are currently going on with the NNPC.
Adeosun however gave hope of the issue being resolved during a re-convening planned to be held in a few days, following the interface ongoing between the Commissioners of Finance Forum, Federal Ministry of Finance, Office of the Accountant General, Central Bank of Nigeria and the NNPC.
A breakdown of balances in the federation accounts show that Excess Crude Account is $1.9 billion; Stabilization Account N18.9 billion and Natural Resources Account is N133.7 billion.
