The new legal status of the national oil giant, Nigeria National Petroleum Corporation (NNPC) Limited, from a wholly government-owned company to a commercial venture may be a double-edged sword for the country and the federating units.
With the new status, the company has ceased to fund the Federation Account, which is the financial conduit that sustains the States and local governments through the Federation Account Allocation Committee, (FAAC), shared every month by the three tiers of government. In the new status, the company will only pay taxes and dividends to the government like any other company. The implication is that the monthly largesse from Abuja will no longer be forthcoming, as its obligations are met on a quarterly basis and only based on profits.
Already, hard-pressed by the prevailing dwindling revenue of the government because of subsidy as NNPC has not made contributions to the FAAC, the prospect looks really grim for both States and local governments. Almost on the brink of insolvency, there is little hope for improvement in their financial state. According to the 2019 Annual States Viability Index (ASVI) released by Economic Confidential two years ago, only six States in the federation are economically viable; these include: Lagos, Ogun, Rivers, Kwara, Kaduna and Enugu.
Also seen as poor and insolvent are Katsina, Kebbi, Borno, Bayelsa and Taraba states, based on their poor Internally-Generated Revenue, (IGR), which is far below 10% of their receipts from the Federation Account. The interpretation of the index is that without the monthly disbursement from FAAC, many of these States would be unviable, and incapable of surviving without the federally-collected revenue, mostly from the oil sector.
The IGR of the 36 States of the federation totalled N1.3 trillion in 2019, when compared to N1.1 trillion in 2018, an increase of about N200 billion. It is almost certain that hard times await some of these States over the new status of NNPC. Many experts have for long contended that the wisdom is that these States should merge so that at the end of the day, they could be reduced to somewhere in the region of 16 States with the capacity to conduct business without depending on FAAC.
The FAAC, normally allotted to the three tiers of government every month, has been endangered recently because of the monumental payment of subsidy on premium motor spirit, (PMS) popularly called petrol by the NNPC under the old order.
Analysts say the metamorphosis of NNPC to a limited liability company would put paid to that and henceforth, permanently stop it from contributing to the FAAC. The experts, who viewed the situation, are saying that the Federal Government and the newly constituted NNPC could face a volley of legal actions over the transition of NNPC to a limited liability company.
Not too long ago, a former chairman of the Nigerian Electricity Regulatory Commission (NERC), Dr. Sam Amadi, blamed the Buhari administration for the plights of the states, hinging it on the administration’s poor handling of the economy.
