11 July 2018

Nigeria: Again, FAAC Meeting Ends in Stalemate

The monthly Federation Account Allocation Committee (FAAC) meeting has again ended in a stalemate as federal and state governments rejected the revenue figures submitted by the Nigerian National Petroleum Corporation (NNPC) for May.

One of the finance commissioners, who did not want to be named, said the committee remained unsatisfied with the figures.

He said the committee agreed to postpone the meeting to Thursday, to give the NNPC a chance to make adjustments .

This is the second time the committee has failed to reach an agreement over revenue generated in the month of May.

A June 27 meeting had been inconclusive. On June 28, the Minister of Finance, Kemi Adeosun, confirmed that the meeting ended in a deadlock.

She said: "For the purpose of this briefing, we operate NNPC as a business. We have invested public capital in that business and we have expectations of returns and when that falls lower than our expectations, then the owners of the business, which in this case is the Federal Government and states, need to act.

"So, that was what caused the deadlock. We really felt the figures that the NNPC proposed for FAAC were unacceptable. We felt that some of the costs could not be justified, and so we have decided that rather than approve the accounts, we will go back and do further work."

Chairman, Forum of Finance Commissioners, Mahmoud Yunusa, had also blamed the discrepancies in revenue remittances by the NNPC.

Addressing journalists on claims and counter claims of remittances, Yunusa alleged that NNPC remitted N127 billion as May earnings, instead of N147 billion, leaving a shortfall of N20 billion.

He said: "NNPC claimed it spent N3.5 billion on product leakages and pipeline vandalism, but the Department of Petroleum Resources (DPR), an agency that is supposed to keep such record, claimed ignorance of the amount."

He said the states got more revenue from NNPC when crude oil was N50/barrel but now get far less when the commodity is almost N80/barrel, wondering why.

"As equal stakeholders in the business, NNPC owes it a duty to Nigerians in the spirit of openness and transparency and by the Act that established it to be open and transparent to all stakeholders. States, as stakeholders in the Federation Account, are not expected to take NNPC's account hook, line and sinker but are allowed by law to ask questions for clarity."

Meanwhile, African Export-Import Bank (Afreximbank) said it has approved financing up to $17 billion for Nigerian entities between the commencement of operations in 1994 and December 2017.

This is an indication of deep financial transactions with the government and private sector operators.

The level of financial deals, according to the bank, represents part of about 40 per cent of its total lending, that the country and the private sector operators, including banks, leverage on in their quest to overcome economic challenges, while the institution has outstanding loans of about $3.5 billion in the country as at December 2017.

The President of Afreximbank, Dr. Benedict Oramah, disclosed this at the groundbreaking ceremony of the regional bank's office in Abuja, yesterday.

He said the proposed edifice will be completed quickly and will feature office, conference hall, exhibition centre and a digital trade information and hub.

Adeosun performed the ceremony, noting that the country welcomes the development. According to her, it took the current administration no time to give approval for the land.

She said the presence of the bank would facilitate the achievement of the long-sought intra-African trade through the breaking of barriers that have inhibited progress.

"Just like many other member countries of the bank, Nigeria continues to support the bank's capital mobilisation by reinvesting its dividends in the bank's capital.

"Since inception, the bank has been very active in Nigeria. This is reflected by the institution's consistent support to corporate and government entities through financing and advisory services and significant financial and technical supports to Nigeria, with the country's share of total loans averaging more than 40 per cent of the bank's aggregate," Adeosun said.

Leading an Afreximbank delegation on a visit to President Muhammadu Buhari, last month, Oramah said that the bank's facilities had made major impact on critical sectors of the Nigerian economy and that it had loans outstanding of about $3.5 billion in the country as at 31 December 2017.

According to the bank's website, he identified the sectors benefiting from the facilities as including financial institutions, transport, hospitality, manufacturing, agro-allied, oil and gas, power, and telecommunications.

Oramah said that Afreximbank's support to Nigeria had included provision of liquidity and trade finance lines of more than $800 million during the banking consolidation when many international banks cut credit lines to the country and the provision of $1.8 billion to support the economy during the recent oil price shock in 2015-2016.

He said the bank's current initiatives in Nigeria include the development of testing and inspection centres across the country in collaboration with the Standards Organisation of Nigeria; establishment of a Centre of Excellence for Tertiary. Healthcare/Medical Park; potential participation in the Nigeria SEZ Investment Company Ltd being promoted by the government; support for industrial projects through loans to strategic banks; arrangement and disbursal of $750 million to the Bank of Industry in June; provision of trade and letter of credit lines to all Nigerian banks, in close coordination with Central Bank of Nigeria, in order to ensure access to trade finance; and development of an Afreximbank Africa Trade Centre in Abuja.

He added that the bank was willing to work with the government to arrange financing of up to $1 billion to support the government's investments in trade enabling infrastructure.

Responding, Buhari thanked Oramah for the visit and commended Afreximbank for its support to the Nigerian economy as well as its work in promoting African trade.

He urged the bank to provide more support to Nigeria's agriculture sector as a way of boosting jobs and facilitating trade.

Nigeria

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