• Stay away from borrowing more, DMO warns FG

The Federation Account Allocation Committee (FAAC) at its meeting, yesterday, shared N786.161 billion between the three tiers of government as federation allocation for the month of May, 2023.

In a statement by the Director, Press and Public Relations of the Federal Ministry of Finance, Budget and National Planning, Stephen Kilebi, from the stated amount, inclusive of Gross Statutory Revenue, Value Added Tax (VAT), Electronic Money Transfer Levy (EMTL) and Exchange Difference, the Federal Government received N301.889 billion, states got N265.875 billion, Local Government Areas got N195.541 billion, while the oil producing states received N22.855 billion as derivation (13 per cent of mineral revenue).

FAAC at the end of the meeting indicated that the gross revenue available from VAT for May was N270.197 billion, which was an increase from the N217.743 billion distributed in the preceding month.

From that amount, the sum of N10.808 billion was allocated for costs of collection and the sum of N7.782 billion given for transfers and refunds. The remaining sum of N251.607 billion was distributed to the three tiers of government of which the Federal Government got N37.741 billion, states received N125.804 billion and LGAs got N88.062 billion.

Accordingly, the Gross Statutory Revenue of N701.787 billion received for the month was higher than the sum of N497.463 billion received in the previous month of April 2023. From that amount, the sum of N26.831 billion was allocated for cost of collection and a total sum of N155.411 billion for transfers and refunds.

The remaining balance of N519.545 billion was distributed as follows: Federal Government was allocated the sum of N261.686 billion, states got N132.731 billion, LGAs got N102.330 billion, and oil derivation got N22.798 billion.

Also, the sum of N14.969 billion from Electronic Money Transfer Levy (EMTL) was distributed to the three tiers of government as follows: Federal Government, N2.155 billion; states, N7.185 billion; LGAs, N5.030 billion; and N0.599 billion was allocated for cost of collection.

Petroleum Profit Tax (PPT), Companies Income Tax (CIT), Oil and Gas Royalties, Import and Excise Duties and VAT all increased significantly, while EMTL decreased marginally.

While the balance in the Excess Crude Account (ECA) as at June 22, 2023 stands at $473,754.57, the Nigerian National Petroleum Corporation Limited (NNPCL) did not remit money into the federation account.

To shore up the revenue base of the country, President Bola Tinubu has set up an inter-agency committee to resolve the lingering row between the NNPCL and FAAC.

This was disclosed, yesterday, by a Presidency source that said: “Mr President has approved the memo from NNPC to set up a committee to reconcile the crisis between NNPC and FAAC over the failure to remit money into the federation account.”

The Presidency source who spoke on the condition of anonymity said that vested interests had told the president things that were not entirely factual, prompting the national oil company to write that the matter be resolved once and for all.

“Because we want the public to know the truth, NNPC management wrote the President to investigate the matter and Mr President has graciously approved that an inter-agency committee be set up to investigate and reconcile the matter,” the industry source stated.

FAAC had on several occasion accused NNPC of short-changing it by refusing to pay over N2 trillion to the federation account from crude sales, royalties and taxes, while NNPC on the other hand had said that the Federal Government owed it over N4 trillion in subsidy payment, power debt and other sundry charges.

The committee, which is expected to begin sitting today, at the Ministry of Finance, is mandated to reconcile the controversies surrounding the N4.2 trillion debt the Federal Government is owing NNPC and the N2.1 trillion that NNPC is said to have failed to remit to FAAC.

Besides the Ministry of Finance and NNPC, other members of the debt reconciliation committee include the Nigerian Upstream Regulatory Commission (NUPRC), Federal Inland Revenue Service (FIRS), Office of the Accountant General of the Federation (OAGF) and FAAC Post-Mortem Sub-Committee.

The establishment of the committee by the President followed a memo dated June 13, 2023 by the Group Chief Executive Officer, NNPC, Mele Kyari, appealing to him to intervene in the matter.

Meanwhile, the Debt Management Office (DMO) has issued a warning to the Federal Government against additional borrowing, citing that 73.5 per cent of this year’s revenue will be used to service debt. According to the DMO, this high Debt Service-to-Revenue ratio is unsustainable and poses a threat to debt sustainability.

The DMO recommended that FG focus on increasing revenue generation to achieve a sustainable Debt Service-to-Revenue ratio. It suggested raising the projected FGN revenue from N10.49 trillion to about N15.5 trillion. These recommendations were made after analysing the nation’s debt profile in 2022.

DMO’s analysis revealed that the Total Public Debt-to-GDP ratio is projected to increase to 37.1 per cent in 2023, mainly due to new borrowings, FG’s Ways and Means (W&M) at the Central Bank of Nigeria (CBN), and estimated Promissory Notes issuance.

While the baseline scenario indicates that the debt stock remains sustainable, the borrowing space has been reduced compared to the self-imposed debt limit of 40 per cent.

The projected FGN Debt Service-to-Revenue ratio of 73.5 per cent for 2023 exceeds the recommended threshold of 50 per cent due to low revenue. This highlights the urgent need to significantly increase government revenue. The DMO emphasised the importance of adhering to existing legislation on government borrowing, such as the Fiscal Responsibility Act 2007 and the CBN Act 2007, to moderate the growth rate of public debt.

Furthermore, the DMO called for a focus on revenue mobilisation initiatives and reforms to increase the country’s tax revenue to GDP ratio. It also suggested encouraging private sector involvement in funding infrastructure projects through Public-Private Partnerships (PPP) and reducing borrowing by privatisation or sale of government assets.

Experts have supported the DMO’s caution against further borrowing, highlighting the precarious nature of the debt service-to-revenue ratio. They emphasised the need for fiscal discipline, adherence to borrowing limits, and implementation of measures to improve revenue generation.

The DMO’s warning serves as a reminder of the challenges posed by Nigeria’s high debt burden. It underscores the importance of pursuing sustainable revenue generation strategies and prudent fiscal management to ensure long-term debt sustainability and economic stability. (The Guardian)

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