Pegasus Reporters Issues on the Wing
“According to the MTEF, NNPC Limited received a total of N191 billion from the federation in 2023. In 2024, the company is scheduled to receive N776.45 billion, an increase of 306%. What NNPCL is expected to receive in 2024 is 393% of the statutory allocation to the National Assembly and 470% of the allocation to NJC. It is still worth reminding ourselves again that the last two are whole arms of government: the legislative and the judicial arms, respectively.”
Secretary to the government of the Federation, Mr. George Akume
PEGASUS REPORTERS, LAGOS | DECEMBER 28, 2023
In the first category are agencies that are allowed to charge costs of revenue collection. Three agencies fall into this category: the Federal Inland Revenue Service (FIRS), which keeps 4% of non-oil taxes; the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), which takes 4% of oil and gas royalties, signature bonus and others; and the Nigeria Customs Service (NCS), which charges 7% of duties, excise, fees and some federation and non-federation levies.
From the recently approved 2024 to 2026 Medium Term Expenditure Framework (MTEF), these three agencies will get the following as costs of collection in 2024 alone: NUPRC will receive N266.24 billion; NCS will earn N277.27 billion; and FIRS will collect N317.58 billion (this is after removing N75 billion for FIRS tax refunds). In 2024, the three super agencies will receive N861.49 billion as against the N528.75 billion kept for them in 2023, an increase of 63%. For context, each of these executive agencies, in 2024, will receive more than the statutory allocations for the National Judicial Council (NJC) and the National Assembly (NAss), two distinct arms of government, which in 2024 have been allocated N165 billion and N197.93 billion respectively.
In 2024, NUPRC is scheduled to receive 134% of the allocation to the National Assembly and 161% of NJC’s. Also, the NCS is going to earn 140% of the allocation to the National Assembly and 168% of NJC’s provision. On its part, the FIRS is billed to collect 160% of the funding for the National Assembly, and 192% of the amount earmarked for the NJC. For context also, these super agencies—NUPRC, NCS, and FIRS—are three individual agencies, not even whole ministries in the executive arm. (Some ministries, such as the Ministry of Women Affairs and the Ministry of Tourism, will receive just between N10 billion and N11 billion in 2024, each less than 5% of the allocation to each of the super agencies.)
NNPC Limited is another organisation that can be put in the first category. Following the passage and signing of the Petroleum Industry Act (PIA) in 2021 and NNPCL’s incorporation same year, the national oil company will receive the following for the responsibilities it carries out on behalf the Federation: 30% of the profit oil from Production Sharing Contracts (PSCs) as management fee, 35% of profit oil from Joint Ventures (JVs) for reinvestment, and 20% of the dividends of the federation’s 49% equity in the Nigeria Liquified Natural Gas (NLNG) Limited.
According to the MTEF, NNPC Limited received a total of N191 billion from the federation in 2023. In 2024, the company is scheduled to receive N776.45 billion, an increase of 306%. What NNPCL is expected to receive in 2024 is 393% of the statutory allocation to the National Assembly and 470% of the allocation to NJC. It is still worth reminding ourselves again that the last two are whole arms of government: the legislative and the judicial arms, respectively.
For extra context, it might be worth noting that NNPCL’s expected take in 2024 is almost double the 2024 average state budget of N442.17 billion. (According to StatiSense, 36 states have presented a total of N15.918 trillion as budgets for next year, ranging from N159.5 billion in Ekiti State to N2.25 trillion in Lagos State.) Interestingly, NNPCL’s commission is projected to reach N911.4 billion in 2026. Important to bear in mind that the cuts to the company are separate from the federation’s JV contributions and other fiscal deductions (put at N4.49 trillion in 2024 in the 2024 to 2026 MTEF), and are not inclusive of subsidy deductions since petrol subsidy “is gone.”
In the second category are agencies that receive whole or a portion of specific revenue they don’t even collect or generate. In 2024, some of these agencies are scheduled to receive the following amounts: N27.35 billion to the National Information Technology Development Agency; N29.45 billion as 5% sugar levy to the National Sugar Development Council; N121.26 billion as gas flared penalties to the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), this is less NUPRC’s 4% cost of collection from gas flared penalties; and N130.84 billion as 1% of FG’s share of the Federation Account and some portions of other revenue handles to the National Agency for Science and Engineering Infrastructure (NASENI).
Others include: N263.59 billion as 3% of VAT, 10% of Ecology and Derivation and 10% of FAAC allocation for the North East states to the North East Development Commission (NEDC); N324.84 billion as 15% of FAAC allocation to NDDC states to the Niger Delta Development Commission (NDDC); and N672 billion as 2% Education Tax (minus cost of collection by FIRS) to the Tertiary Education Trust Fund (TETFUND).
The third category of super agencies are those that derive internally generated revenue from fees, levies, and fines. According to Section 22 of the Fiscal Responsibility Act 2007, these agencies are expected to keep 20% of their operating surplus (excess of revenue over expenditure) in their general reserve fund and remit the remaining 80% into the Consolidated Revenue Fund (CRF) of the Federal Government. However, the key here is how expansive expenditure can be. The 2020 Finance Act, followed by a Finance Circular of 20 December 2021, disaggregated the revenue-generating agencies and put a cap as follows: organisations fully funded from the budget should remit 100% of their IGR while those partially funded by the government should limit their expenditure to no more than 50% of their IGR and remit the remaining to the CRF, and agencies that are fully self-funding should limit their expenditure to no more than 50% of their IGR, keep 20% of their operating surplus and transmit 80% to CRF.
From the above, it is clear that there have been some attempts to straighten out this last set of super agencies, and that is assuming compliance has been total and uniform. But there is still more work to be done. And for this we should be grateful to Mr. Babatunde Irukera, the CEO of the Federal Competition and Consumer Protection Commission (FCCPC), for his recent rich insight. According to Irukera, FCCPC generated N56 billion as IGR in 2023, 90% of which came from penalties against businesses and companies. Out of the N56 billion, FCCPC generously remitted N22.4 billion to the federal government. This has earned him some PR points.
But, the difference between income and remittance indicates that the agency retained N33.6 billion or 60% of its IGR. Based on the assumption that FCCPC is now fully self-funding, the N33.6 billion retained was probably arrived at as follows: N28 billion representing 50% of revenue retained to cover expenditure plus 20% or N5.6 billion of the operating surplus of N28 billion also retained. The rub, however, is this: in 2017, according to Irukera, FCCPC received only N1 billion from the FG and raised N154 million as IGR, totalling N1.154 billion. So, in what planet should a public organisation’s revenue go from N1.15 billion to N33.60 billion within six years, an increase of 2,812%?
https://www.thisdaylive.com/index.php/2023/12/24/revisiting-how-nigerias-super-agencies-are-funded
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