Saturday, 10th June 2023

‘Financial restructuring will enable states manage their resources’

By Bertram Nwannekanma
11 May 2021   |   4:15 am
MR. SYLVA OGWEMOH (SAN) is a Lagos based commercial lawyer and Senior Advocate of Nigeria. In this interview with BERTRAM NWWANEKANMA, he spoke on the recent revelation that the Nigerian National Petroleum Corporation (NNPC) may not remit money into the federation account domiciled at the Central Bank of Nigeria for lack of money. What is…


MR. SYLVA OGWEMOH (SAN) is a Lagos based commercial lawyer and Senior Advocate of Nigeria. In this interview with BERTRAM NWWANEKANMA, he spoke on the recent revelation that the Nigerian National Petroleum Corporation (NNPC) may not remit money into the federation account domiciled at the Central Bank of Nigeria for lack of money.

What is your reaction to the recent revelation by the Nigerian National Petroleum Corporation (NNPC) that it does not have money to remit into the federation account for the month of May?
My answer to your question will be from two angles. First, is NNPC interested in issuing mere threats or there is a factual basis for this position the management of NNPC has taken with respect to remittance of money into the federation account. Second point is whether NNPC will be legally justified in refusing to make remittance into the federation account. With respect to the first point, the letter from NNPC to the Accountant General of the Federation says it all.

The letter made it clear, that the landing cost for Premium Motor Spirit for the month of March 2021 was N184 per litre against the subsisting ex-coastal price of N128 per litre, which has remained constant notwithstanding the changes in the macroeconomic variables affecting petroleum products pricing. NNPC has complained that because of the price difference, it recorded a value shortfall of over N111.9 Billion in February 2021 and thereafter provided a factual projection of remittance to the federation account for the next three months in a schedule attached to the letter. Given this position of the corporation, I am of the view that there is a factual basis for its projected zero remittance in May 2021.

The second point is whether NNPC is legally justified in its position. This is indeed a difficult point to deal with given that the obligation or duty to remit the revenue collected by the Federal Government to the Federation Account is mandatory because of the clear provision of section 162(1) of the Constitution of the Federal Republic of Nigeria 1999 (as amended) and no agency of the Federal Government has the power to vary that provision by choice or a mere pronouncement in whatsoever manner. However, the obvious question is- can you give what do not have? In my opinion, NNPC can only remit what it is able to generate in terms of revenue. Where no income accrues to it, there is obviously nothing for it to remit to the federation account.

Granted that NNPC does not have the power to choose either to remit money to the Federation Account or not as the obligation to so remit is constitutional and does not admit of any exceptions, the point is clear that where no revenue accrues to it in a particular month, it will have nothing to remit to the federation account and this brings us to the point of the country’s over-dependence on oil as its only source of revenue. The time is now to start thinking of other sources of revenue to support our economy.

Does it not run foul to the FAAC act?
From the perspective of the Constitution of the Federal Republic of Nigeria 1999 (as amended) and other Acts of the National Assembly that is, the Revenue Mobilization Allocation and Fiscal Commission Act, Allocation of Revenue (Federation Account, Etc.) Act, the NNPC’s threatened action or inaction if carried out would run foul of the Constitution and other relevant laws, which make provisions on how revenue accrues to the Federation Account, method of disbursement and other related matters. But as I have earlier stated, you cannot give what do not have. It is obvious the country is in a precarious situation and we are experiencing serious financial challenges due largely to our dependence on a single product as a source of revenue for the Federal Government. Again, I repeat this is the time to put on our thinking caps and take urgent steps to nip this threat to our economic survival in the bud and ensure that the Nigerian economy does not collapse.

Many have called on the Federal Government to compel NNPC to “return unremitted money between 2010 and 2014 and another N94 trillion oil money held by oil operators. What is your position on this?
As earlier stated, the obligation to remit money or revenue to the Federation Account by concerned stakeholders is constitutional and mandatory as provided for under section 162(1) of the Constitution of the Federal Republic of Nigeria 1999 (as amended). Therefore, the refusal or omission by the NNPC to remit the accrued revenue to the Federal Government between 2010 and 2014 was unconstitutional. In my considered view, the calls from many quarters that the NNPC be compelled by the Federal Government to return the unremitted revenue between 2010 and 2014 are in order. The Constitution and indeed the rule of law must be obeyed and observed. The call is also important and timely because if the NNPC could not account for such huge sums of money within such a long period of time, it means the leadership of the Corporation has some questions to answer. A lot need to be done in that Corporation to ensure some level of sanity and a corrupt free agency.

The Auditor-General of the Federation has also revealed that between 2010 and 2014, $16 billion worth of crude oil was not accounted for by NNPC. Also, Revenue Mobilisation and Allocation Commission (RMAC) and Nigeria Extractive Industries Transparency Initiative (NEITI) have come out to say that NNPC has failed to remit to the federation account, about $22 billion dividends paid by Liquefied Natural Gas (LNG). What implication does it has on FAAC Acts?
FAAC and Revenue Mobilisation Allocation and Fiscal Commission were created to monitor the accruals to the Federation Account and that of states, respectively. Where the huge sums you have mentioned have been generated but not remitted to the Federation Account by an agency which generated such monies, the simple result will be that the Federation Account would not be sufficiently funded, and the implication is that the relevant stakeholders saddled with the responsibility of allocating the funds from the Federation Account would be helpless in the performance of their duties.

The above could be responsible for the recent shortfall in state allocations from the Federation Account. This has led to the inability of many states to pay salaries and fund other projects. In my opinion, the Federal Government must embark on serious investigation of the NNPC leadership to ensure full recovery of the said missing or withheld sum as claimed by the Auditor-General.

There has been call for financial restructuring at the state level to allow them manage their resources and pay taxes to the Federal Government.  Do you support such idea?
The truth is that there is too much concentration on the revenue accruing from oil by the various tiers of government with a total and complete neglect of other sources of revenue and indeed other mineral deposits and natural resources from which revenue can be generated by the State and Federal government. Different states of the Federation have different untapped mineral deposits but the Federal government’s attention for so long has been focused on crude oil. The sad reality is that those states are not allowed to extract those mineral resources as the Constitution has exclusively vested such power on the Federal Government by virtue of the Exclusive Legislative List under Part 1 of the Second Schedule to the Constitution.

In the circumstance, many states of the Federation that have no crude oil deposits from which the 13per cent derivation fund accrues have been subjected to very precarious financial situation even though there are or could be other natural resources in those states that should ordinarily generate revenue to the states.

Indeed, if states are allowed to control their resources and pay royalty to the Federal Government, they would have enough financial strength to realise their maximum potentials such as regular payment of salaries, pensions, and embark on many capital projects among others.

In the light of what I have said, I do support the idea of financial restructuring to enable states manage mineral resources in their respective states.

With the rising insecurity in the country what do you consider as the major challenge in protecting of life and property?
To answer your question, let me first state that, the protection of life and property is the core responsibility of government. The government is saddled with the responsibility to ensure that the nation’s security apparatus is in a functional state to guarantee the safety of all Nigerians. Regrettably, this core obligation appears to have been abdicated by the present government, which does not seem to be in control of the nation’s security architecture from all indication as it ought to be.

In my considered view, all it takes for the country to solve the current security challenges is to have a responsive and well-managed security architecture to deal with the present security challenges that the country is facing. It is not in doubt that the present system is simply not working. Security is better managed when the actors in control of the security architecture are ahead of the criminals. You do not employ a reactive method but a proactive one.

For example, I have lost count of the number of Prison breaks we have had in the country over the last couple of years. What has been the response of the security apparatus to the series of Prison breaks. It has been a zero response. In a well-managed system, once there is a security breach, it is analyzed, the causative factors are immediately identified, the persons behind the crime are identified, the method applied to carry out the crime is also strictly analyzed with a view to ensure that there is no re-occurrence in the future. Have we ever carried out such an analysis, I do not think we have, because if we have been applying this methodology, you would not be seeing the current increase in crime and criminality in the country.

Secondly, the rate of unemployment in the country is partly responsible for the increasing security challenges the country is currently experiencing. There are many frustrated graduates and non-graduates of employable age roaming the streets without any meaningful engagement. As the saying goes “an idle mind is a devil’s workshop”. Addressing the problem of unemployment would greatly reduce the rate of insecurity in the country.

Thirdly, many acts of criminality in the country have political undertone. Security challenges such as the Fulani Herdsmen and farmers clashes, kidnappings and other forms of banditry are largely believed in many quarters to be linked with political sponsorship. Closely connected with this is the lack of commitment on the part of the Federal Government to make arrests and punish offenders. Once there is a failure on the part of government to immediately activate the machinery for dealing with offenders when crimes are committed, the wrong signal is sent to the criminals and they become emboldened to perpetrate their criminal activities. Unfortunately to my knowledge, I am yet to see arrests being made by the Federal Government of persons believed to be involved in criminal activities or linked to the sponsorship of such activities all over the country.

I also see a complete lack of coordination between the various armed forces and the Police in the fight against criminals and criminality. It is the belief in many quarters until the contrary is shown that the ranks of the armed forces may have been infiltrated by moles and persons loyal to the criminals and insurgents and until this issue is dealt with decisively, it may be difficult for the armed forces to win the war by continually employing the same tactics and personnel in fighting the war against the insurgents and kidnappers.

In my humble opinion, the solution to the current security challenges lies with the Federal Government. The President should take the lead, sit up and take responsibility for the security of the nation. The current security apparatus should be reformed and empowered to be more proactive, responsible, responsive, and indeed more professional in carrying out the duties of protection of life and property. No terrorist group would survive in any country, if there is no government support or inaction towards it. Those in the corridors of power that may have anything to do with those terrorists should be fished out and be made to face the full wrath of the law.

The government should refrain from encouraging banditry and indiscriminate kidnappings going on in the country by paying huge sums of money as ransom. Constant payment of huge sums of monies to the bandits instead of hunting them down for prosecution is encouraging them to commit more evils. Perpetrators of various kinds of heinous crimes should be arrested and made to face prosecution rather than the current amnesty the Federal Government is giving them as many more would embark on similar ventures.

We are in the age of modern technology. We must invest heavily in technology and personnel training to deal with the present level of crime and criminality. We cannot be employing the old methods that are no longer working and hope to win the war against criminals.

Security personnel that may have been compromised and or found wanting in the discharge of their duties should also be seriously dealt with to serve as deterrent. Such people should be painstakingly fished out to face prosecution.

Lastly, every Nigerian must take responsibility for his own security. This Country is ours and we must secure it for our own good. Security personnel cannot do it without the cooperation of the general public. We must support and encourage our security men in whatever way possible.