NNPC insolvent, can't repay N450bn debt- Babalola, Oniwon

THE PUNCH Newspaper- Martin Ayankola and Ifeanyi Onuba

The Nigerian National Petroleum Corporation does not have enough money to fund its operations and is technically insolvent because of unpaid subsidies it is demanding from the government, the Minister of State for Finance, Mr. Remi Babalola, has said.

”NNPC is insolvent as current liabilities exceed current assets,” Babalola told a Federation Accounts Allocation Committee meeting in Abuja on Tuesday.

”NNPC is incapable of repaying the N450bn owed to the Federation Account unless it is reimbursed the N1.156tn (in subsidies) it has requested from the Federal Ministry of Finance,” he added.

The Group Managing Director of the corporation, Mr. Austen Oniwon, had disclosed in a letter sent to the minister that the corporation was unable to pay the amount due to various challenges currently being faced in the oil sector.

Despite being Africa‘s biggest oil and gas producer, Nigeria is reliant on imports to meet its energy needs. The nation‘s four refineries are in disrepair, but even at full capacity, they would only meet around a quarter of domestic energy demand.

President Goodluck Jonathan has ordered the finance ministry to audit the accounts of NNPC, which has been plagued by mismanagement and corruption over the years.

NNPC’s indebtedness to FAAC dates back to 2008 when the corporation refused to remit the portion of statutorily generated revenue as mandated by the 1999 Constitution to the Federation Account.

FAAC had at various times summoned the GMD to come and explain how the corporation would come up with a repayment plan that would enable it settle the debt.

Oniwon’s letter read in part, “NNPC is facing financial difficulties evidenced by, amongst others, the inability to pay for the domestic crude as at when due and delays in settling bills for fuel imports. The financial difficulties stem from disequilibrium between costs and cash inflow streams.

“The corporation is owed substantial amounts as unreimbursed subsidy on petroleum products. NNPC spends increasing sums of money in repairing/replacing vandalised assets and is suffering from products losses arising therefrom.

“The costs of holding strategic reserves of petroleum products on behalf of the Federal Government, including demurrage, are borne by NNPC.”

The letter went further to explain, “NNPC is insolvent as current liabilities exceeded current assets by N754bn as at December 31, 2008, and as such, NNPC is incapable of repaying the N450bn owed to the Federation Account unless it is reimbursed the N1.16tn requested from the Federal Ministry of Finance.”

Asked if FAAC would write off the N450bn debt, Babalola said that since the issuew was now beyond the committee, it had to be taken to President Goodluck Jonathan for consideration.

He 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 on that matter.”

On how the finance ministry would source for fund to pay the N1.16tn owed NNPC, he said, “We don’t even know whether we owe them that amount, so I can’t talk on that because we have not audited or verify it. The job of the Ministry of Finance is to look for finance, but what is important is for NNPC to actually pay the money that they agreed that they owe the Federation Account.”

Meanwhile, a total of N413bn was disbursed by the committee to the three tiers of government as statutory allocation for the month of June.

When compared with what was distributed in May, the amount represents an increase of N9.86bn or 2.45 per cent.

The distributable statutory revenue for the month stood at N361.25bn indicating an increase of N21.1bn or 6.21 per cent over that of May.

On the Excess Crude Account, he said, “What went to the foreign ECA is $179m. This brings the balance to $3.54bn and also another sum of N20bn went to the domestic ECA bringing this account to N60.9bn. In addition to that, a sum of N75bn went into the Excess Revenue Account.”


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