Worried by the intractable problem of fuel subsidy, which has affected the amount of money available for distribution among the three tiers of government, governors of the 36 states of the federation are mulling presenting to the federal government a demand for their shares and those of the local governments from the Federation Account to be given to them in dollars.
One of the governors who spoke anonymously at the weekend in Abuja said that their efforts to resolve the issue so far has failed to yield any positive result due to pushback from some federal government officials, who believed a full deregulation of the downstream sector of the oil industry, which would lead to uncapping petrol price would be injurious to the poor, whom President Muhammadu Buhari has vowed to protect from the vulnerabilities of the nation’s economy.
The governors upcoming push came just as Nigerian Governors’ Forum (NGF) Chairman and Ekiti State governor, Kayode Fayemi, criticised the Nigerian Financial Intelligence Unit (NFIU) for writing to banks to restrict transactions from joint accounts between states and local governments.
Expressing concern on the deleterious effects of fuel subsidy on states’ finances, the source said given the negative reactions so far from the federal government on their advocacy for fuel subsidy removal, states have no choice but to think out a new strategy to deal with the knotty issue.
According to him, states would get better value for their shares from the Federation Account if federally-collected revenue, such as oil is distributed in the currency they are collected.
Data from the Central Bank of Nigeria (CBN) showed that in 2018, Nigeria netted a total of N5.54 trillion from oil revenue. That is about $18.1 billion when converted at the official exchange rate of N305 to $1.
A breakdown of the figure showed that the N5.54 trillion revenue was earned through three major oil revenue sources, which were crude oil/gas sales, petroleum profit tax/royalties and others.
Also, the immediate past Managing Director, International Monetary Fund (IMF), Ms. Christine Lagarde, while calling on the federal government to remove fuel subsidy during the joint annual spring meetings with the World Bank in Washington DC last April, had said that Nigeria had spent $5. 2 trillion from 2015 till then on fuel subsidies and the consequences thereof.
Between January and November 2018, the Nigerian National Petroleum Corporation (NNPC) in a document presented to the Federation Account Allocation Committee (FAAC) in December 2018, said it incurred N623.16 billion in 11 months under its under recovery programme, the new name it gave fuel subsidy to beat the lack of legislative approval for the expenditure as demanded by law.
On how feasible the idea of states and local governments being paid their shares of revenue from the Federation Account in dollars is, given the fact that not all in the money that come to the central basket is earned in the United States’ currency, the governor said the idea was at an infant stage but they would get around to working out the modalities to make it achievable.
He added that many states are in financial straits due to the fluctuation in earnings from the Federation Account, occasioned by oil price volatility and fuel subsidy as well as challenges of boosting internally-generated revenue.
The poor financial states of the second tier of government, he said, had impaired the ability of governors to deliver on their electoral promises and to providing other services to improve the welfare of the people.