N1.15tr Debt Crippling NNPC, Says GMD

Written by This Day Wednesday, 14 July 2010

Group Managing Director of the Nigeria National Petroleum Corporation (NNPC), Mr Austin Oniwon, has said that the corporation is unable to pay the N450 billion debt it owes the federation account partly because its current liabilities surpass its assets by N754 billion as at December 31, 2008.

But the corporation quickly moved yesterday to quell suggestions by the Minister of State for Finance, Mr. Remi Babalola, that it was insolvent, maintaining that it is being owed fuel subsidy arrears of N1.156 trillion by the Federal Government.
If reimbursed, the NNPC said it would enable the corporation offset the N450 billion debt being owed the Federation Account Allocation Committee (FAAC).

But revenue amounting to N413.277 billion was yesterday distributed among the federal, state and local governments for the month of June in spite of NNPC’s indebtedness to FAAC.

NNPC’s financial position was contained in a letter signed by Oniwon and addressed to the Chairman of FAAC last Monday, in response to a letter from the committee demanding that the corporation provide a repayment plan for the debt at FAAC’s monthly meeting held yesterday.

Speaking at the meeting, Babalola said: “The distributable Statutory Revenue for the month is N361.25 billion, which shows an increase of N21.119 billion or 6.21 per cent compared to that of May 2010. The increase was attributable to improved production as a result of re-opening of Trans Forcados, EA Terminals and Nembe Creek trunks line as well as Force Majeure lifted in Brass Terminal.”

The minister said President Goodluck Jonathan had directed the Department of Petroleum Resources (DPR) to, henceforth, generate monthly oil production statistics for reconciliation in the second month after the month of data gathering.
This directive, he explained, had become necessary to address the problem of recoveries for overpayment and underpayment to state from the 13 per cent derivation computation due to the lateness in the release of derivation indices.

“Furthermore, Mr. President has also directed that the Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC) should ensure that the figures so generated are used for the computation and sent to the Federal Ministry of Finance for revenue allocation by the third month following the initial month of data generation,” he said.

According to the minister, other reasons given by NNPC for defaulting in payment of debts include the fact that it is facing financial difficulties evidenced by, among other things, the inability to pay for domestic crude as and when due, and delays in settling bills for fuel import.

He also said that NNPC’s financial difficulties stemmed from disequilibrium between cost and cash inflow streams and that the corporation is owed substantial amounts as un-reimbursed subsidy on petroleum products.

Additional reasons provided for its failure to meet its obligation was that the corporation is spending increasing sums of money in repairing/replacing vandalised assets and is suffering from products loss arising therefrom.

On what action the committee has decided to take against NNPC and the claim that the corporation is being owed by the Federal Government, Babalola said: “It was resolved that we should write to the presidency to find a solution to how NNPC will pay the federation account - that was the position of FAAC for that matter: we don’t even know we owe them any money, so I can’t talk of how... the job of the ministry of finance is to find finance, so there shouldn’t be any problem if we owe them: but the one that is important is for NNPC to actually pay the money that they’ve agreed they owe the federation account because we have not audited it - we have not verified it. Until when that is done, that is when we can say that we owe them.”

NNPC yesterday said contrary to the statement credited to Babalola that the NNPC is insolvent, the management of the corporation was canvassing strong arguments to the contrary.

Group General Manager Group Public Affairs of the corporation, Dr. Levi Ajuonuma, stated that NNPC was not incapable of meeting its financial obligations to its partners and stakeholders.

“We cannot be classified as insolvent when we have a healthy cash flow and we can pay for our crude and product importation obligations. While it is true that the national indebtedness to the NNPC is putting pressure on our operations, nonetheless we are able to meet all our obligations. We therefore cannot be said to be insolvent,’’ Ajuonuma stated.

He said that the NNPC would continue to play its central role of ensuring steady and efficient supply of petroleum products throughout the country and urged Nigerians and its Joint Venture Partners to remain calm.

Meanwhile, the Accountant-General of the Federation, Alhaji Ibrahim Dankwambo, said yesterday that the Excess Crude Account (foreign) stood at $3.54 billion while the Excess Crude Account (domestic) is valued at N50.9 billion.

“And in addition to that, the sum of N75 billion went into the excess revenue account. What resulted to the increase in the amount we are sharing is that while we maintain the N365 billion shared to the federation account, there was an increase in VAT. The Value Added Tax increased from what we shared last month and that is the increase,” he said.