Posted by From Kunle Aderinokun in Abuja on
The 36 States of the Federation yesterday accused the Nigerian National Petroleum Corp-oration (NNPC) of withholding N31 billion from the proceeds of the sale of domestic crude oil for May.
The 36 States of the Federation yesterday accused the Nigerian National Petroleum Corp-oration (NNPC) of withholding N31 billion from the proceeds of the sale of domestic crude oil for May. This brings funds the Corporation has held back from January to date to N92 billion.
The revelation came on the day Finance Minister, Dr. Ngozi Okonjo-Iweala decleared that, contrary to the position presented by the Revenue Mobilisation, Allocation and Fiscal Commission (RMA-FC), to the Senate implying that the foreign reserves may have been depleted, no money was missing. She said as at the end May, the level of the nation's foreign reserves was $34.09 billion while the amount saved in the excess crude account as at yesterday, June 20, totaled $10.017 billion.
Speaking after the monthly Federation Account Allocation Committee (FAAC) meeting yesterday, Minister of State for Finance, Mrs. Nenadi Usman said despite the funds withheld, the three tiers of government, namely the Federal, state and local governments, who are the beneficiaries of the Federation Account shared N257 billion for May.
According to Usman, "for this year, from January to June 2006, what the NNPC has withheld is about N92billion".
She however said, in a bid to stop the ugly trend, the three tiers of government have set up Petroleum Support Fund (PSF) to be managed by Petroleum Products Pricing and Regulatory Agency (PPPRA), which will become operational in July.
According to her, "we collectively decided here that starting from July 2006, we are going to have NNPC to always give us an invoice and charge us for how much they feel the subsidy is and then we pay them.
"So, there shouldn't be any withholding of funds anymore. Because I am sure that you are aware that all the three tiers of government collectively have set up the Petroleum Support Fund which will be managed by the PPPRA. So, we hope that from next month it will come into operation,” she said.
On whether FAAC will penalise NNPC for withholding the funds, Nenadi said, "we are addressing the issue. But we also collectively agreed that if there is subsidy, and we think collectively as three tiers of government that we don't want Nigerians to pay more for petroleum products than they already are paying.
"And you know you must agree that the higher the price of crude oil in the oil market the more the level of subsidy that is expected of the three tiers of government. So, basically that is the problem.
"We do appreciate the problem of NNPC that there is indeed subsidy and we have all agreed that there is subsidy. But what we don't agree on is the process or procedure of settling this subsidy,” she added.
On how much that has been released to the NNPC out of the N150 billion Petroleum Support Fund set aside by the Federal and State Governments in the 2006 budget, Usman said, "we have not released anything to NNPC because they have never come up to ask us (FAAC) that we should pay them. Instead, the NNPC nets off right from source and pay us what is due to us after deducting what the subsidy is.
"We have not been asked by NNPC to pay anything. But now we want to make sure that when NNPC asks us we would pay, but the corporation must bring back all the money".
Speaking on the contentious excess crude proceeds, Usman revealed that about $10 billion has been saved in the account to date noting that the withdrawals from the account were for capital projects and some debts.
"The withdrawals as you know are not for anyone, but for the independent power project, for the payment of the Paris Club debt, for the gas owed to NLNG and Brass NLNG, and also for the gas pipeline. So, those were the withdrawals," she said,commenting on the alleged summon of the Debt Management Office (DMO) by the Presidency over payments of fees to consultants, contracted as financial advisors for the debt relief, she said, "there was nothing of such nature.
The only thing I know is that it is not true. I am very certain that there was no such meeting because the meeting that held was not even with the President but was with us in the ministry.
"It is to discuss our ministry's issues. We have a Cash Management Committee through which we tried to manage how we spent our cash so that it will be more efficient and DMO is a member. I am even shocked by the report", she said.
However, she argued that the withdrawal from the excess crude account was legal contrary to the position of the chairman of RMAFC, Engr. Hamman Tukur. "It is not illegal. The constitution says that there should be cost of collection. I can't remember the exact section of the constitution. But we went to the National Assembly. Didn't we?
Meanwhile, Okonjo-Iweala has said that contrary to the position presented by RMAFC, to the Senate implying that the foreign reserves may have been depleted, no money was missing.
She said as at the end May, the level of the nation's foreign reserves was $34.09 billion while the amount saved in the excess crude account as at yesterday, June 20, totaled $10.017 billion.
Okonjo-Iweala who addressed newsmen yesterday in Abuja said "all monies in the statutory accounts are intact and no irregular or illegal deductions have been made.
According to her, "the paper presented by Engr Tukur to the National Assembly has a table in it that we don't recognise. It is not part our documents at FAAC and it is made up of figures that are not valid."
She stressed that, "all the monies deducted were for important projects namely exit payments on the Paris Club debt deal; Niger-Delta power plants; extra two days of the last national census."
Assuring that "all the payment are documented and accounted for, she expressed readiness and looked forward to sharing this information with the National Assembly committee when it reconvenes in August."
Tukur, the chairman of RMAFC had last Thursday told Senators amongst others that gathered at the Public Hearing called by the Senate that the amount in the nation's foreign reserves stood at $12.5 billion as at the end of May, which contradicted the record of $34.09 billion given by the Central Bank of Nigeria (CBN). He had said operation of the excess crude account was illegal and also considered illegal withdrawal from the foreign reserve account.
It could be recalled that, shortly after the debate on the constitution review, which major highlight was the Third Term, Senator Farouk Bello Bunza sparked off a controversy when he said Nigeria’s foreign reserve had been reduced to $9.9 billion and that monies were withdrawn from the account without the consent of the Senate.
But Okonjo-Iweala who spoke yesterday alongside the Attorney-General of the Federation and Minister of Justice, Chief Bayo Ojo, Minister of State for Finance, Mrs. Nenadi Usman, Permanent Secretary, Ministry of Finance, Baba Ijo O.O. Ogunkua and members of the Economic Team including the Director-General, Budget Office of the Federation, Mr. Olabode Agusto; the Accountant-General of the Federation, Mr. Ibrahim Dankwambo; Governor of the CBN, Professor Charles Soludo represented by the Deputy Governor, Operations, Dr. Shamsudeen Usman, amongst others, argued and maintained that all the parties involved were consulted in the withdrawal from the account and payment for the outstanding debt after the $18 billion debt relief granted the country as well as those budgeted for the power projects.
According to her, "the National Assembly passed the bill authorising to pay $12.4 billion from the Consolidated Revenue Fund (CRF). The bill was passed and we were able to settle the debt as a federation issue. But because the CRF does not have all the money , we had to go to the consolidation account to get the balance. Everything we did had the understanding of everybody. All the parties involved were consulted."
The finance minister submitted that government has actually saved the nation money by negotiating the best deal for the country.
According to her, "there is no basis for the allegation that the nation's resources have been frittered away. In fact, the opposite is true. The Federal Government has actually saved money that would otherwise have been spent by negotiating the best deals for the country."
She argued that "contrary to the assertions by the RMAFC, no phantom consultant was paid one percent commission. Rather, in line with normal banking practice, the Central Bank of Nigeria charged one percent transaction commission. This percentage was later reduced by the CBN to 0.25 per cent on the instruction of the President. It is ridiculous to suggest, as the RMAFC did in its presentation, that a creditor should be responsible for a transaction fee.
"The $100,000 monthly fee paid Lazard Freres, the financial advisors on the debt deal was both concessionary and competitive. The industry standard is in the region of $250,000. The advisors accepted this fee because the finance minister and the DMO already had the necessary technical capacity. Compare the fees Nigeria paid Lazard Freres with what two other countries paid the firm: Iraq-$600,000 per month and $250,000 per month."
Justifying the use of Lazard Freres, she said: "It is worth noting that Lazard Freres is in the top ten of the global financial advisors on negotiations with the Paris Club and the London Club. The firm has handled about 40 such deals for more than 30 countries in Europe, Asia, Africa and Latin America from the 1990s to date. It carried out two previous assignments for Nigeria in the early 1990s. It therefore had an up to date database on Nigeria and that conferred on it an advantage. That is why we used it."
In his presentation, Dr. Shamsudeen Usman did the breakdown as $34.09 billion (as at May 31, 2006) external reserves as: unmonetised portion, $11.87 billion (excess crude balance-$9.30 billion, FGN balances- $2.57 billion); monetised portion (CBN), $22.22 billion.
He explained that, "the excess crude balance is only a portion of and does not constitute the total level of external reserves of Nigeria."
He also said "the monetised portion is the foreign exchange proceeds (majority from oil) that have been converted into naira and shared among the three tiers of government."
This, according to him, was shown as CBN's portion of the reserves.
Similarly, he explained that, "the unmonetised portion maintained in the foreign currency and not (yet) converted into naira-mostly excess crude proceeds."
This, he pointed out was shown as FGN/federation reserves.
In his contribution, Ojo said, "with this presentation, you can all see that there is money that is missing. Every kobo is accounted for."
He expressed the opinion that, "never in the history has there been so much accountability," adding that "I want to assure that the President follows the rule of law and due process and has never breached any law."
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This is a great piece of history, which is dear to our hearts as people and very much appreciated.
Many thanks to the people who worked hard in the past and those who are still making efforts to keep the institution.
The labour is obviouly worth it. We are proud of you all.
A lot still to be done, with the motivation of the champions of this course, others will follow as well to maintain the institution
May God continue to keep the edifice for development of future generations to the glory of God and the benefits of our fatherland.