The federal government through the Nigerian National Petroleum Corporation (NNPC) is struggling to fund its priority projects in the country’s oil and gas industry.
This development has led to a deficit of over $2.6billion, according to a document presented by the corporation to the Federation Account Allocation Committee (FAAC) in December 2021.
At the beginning of 2021, the government propose it will spend $536 million per month for cost recovery and government priority projects per month, rounding off at $5.8 billion for the year.
Findings by BusinessDay from NNPC’s latest FAAC report showed the federal government is having a deficit of over $2.6 billion on Cost Recovery and government priority projects.
Cost recovery refers to a mechanism through which a party to an oil and gas project can recover most, if not all, of its capital and operating costs out of a specified percentage of production called ‘cost recovery oil’.
Some of the ongoing projects in the budget of the NNPC include a handful of national domestic gas development initiatives, frontier exploration, renewable energy and the Nigeria/Morocco pipeline.
Others include the Gbaramatu IPP/Excravos environs power plant, upgrade and rehabilitation of Delta IV, upgrade of Oben metering, Sapele metering station, Ajaokuta metering station as well as construction of Egbin 500mmscfd gas facility.
There’s also construction of the West Niger Delta project, Asa north Ohaji project, Excravos/Lagos pipeline expansion, OB3 supply lines as well as the Ajaokuta-Kaduna-Kano (AKK) project.
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A breakdown of the figures seen by BusinessDay showed that $196.1 million of the budgeted $536 million was released in January 2021 leading to a deficit of $259.6 million, $168.5 million was released in February leading to a deficit of $283 million while in March $128.101 million was made available for funding the projects leading to a deficit of $228 million.
In addition, $167.2 million was pumped into the projects in April leading to a deficit of $296 million; in May it was $172 million leading to a deficit of $148 million, while June saw the release of a meagre $14.2 million leading to a whopping deficit of $333.7 million in June.
In July August and September, the NNPC recorded a deficit of $295 million, $183 million and $155 million respectively while in October and November the NNPC recorded further deficit of $181million and $325 million respectively.
The NNPC had been posting value shortfalls on a monthly basis due to its spendings on petrol subsidy, a development that had consistently reduced its remittances to FAAC.
The NNPC’s report also noted that a whopping N270.83billion will be deducted from what would be shared by FAAC in January 2022, the NNPC stated that the amount was an estimate of its value shortfall in November this year.
It said, “The estimated value shortfall of N270,831,143,856.56 is to be recovered from the December, 2021 proceed due for sharing at the January 2022 FAAC meeting.
“This value shortfall consists of N220,110,853,427.56 for November and N50,720,290,429.00 deferred for recovery in December 2021 FAAC Report.”
State governors had kicked against the continued subsidy on petrol by the NNPC, but experts and labour unions cautioned the government to be careful as it considers a halt in the PMS subsidy regime.
The NNPC has remained the sole importer of petrol into Nigeria for about four years running and has been shouldering the cost of the PMS subsidy, being the provider of last resort.
