Findings have shown that between January to May 2021, the Nigerian National Petroleum Corporation (NNPC) incurred an approximate sum of N388.4billion in what it termed ‘value shortfall’.
Value shortfall according to an online definition applies to any situation where the level of funds required to meet an obligation is not available.
The under-recovery no doubt is owing to NNPC’s inability to review the price of the Petroleum Motor Spirit(PMS) in line with the dynamics of market realities in over four months.
According to NNPC’s monthly FAAC releases, it was revealed that in January, the Corporation’s under-recovery was N25.4billion while over N60.4billion was recorded in February.
A further breakdown showed that for March, April and May, the NNPC lost N62bn, N126.3bn and N114.3bn respectively.
The NNPC explained that the shortfall was due to the difference between the landing cost and ex-coastal price within the months in question.
It also stressed that this had affected the revenues accruable to the Federation even as it awaits the outcome of engagements between the Federal Government and other relevant stakeholders.
Consequently, the April FAAC report, for instance, showed that after deductions such as JV cost recovery, pipeline management, pipeline repairs, value shortfall among others were made, the total sum available for payment from total revenue of N156.4billion was an approximate N16billion.
However, with the payment of dues, such as government priority projects, DPR royalties, FIRS taxes among others, nothing was remitted in April.
Different terms, the same meanings
In recent times, the question of if the FG was subsidizing the differences in the price of PMS has generated a lot of controversies considering that subsidy is not provided for in the budget.
Also, experts have queried the difference between what FG refers to as subsidy and under recovery.
But again, in the just-released FAAC reports, the NNPC again adopted the term “NNPC value shortfall ” in place of under-recovery.
In reaction to this, energy expert, Mr Bala Zakka who spoke with the Nigerian Tribune on Sunday argued that irrespective of the terminology adopted, to explain the current reality, this speaks to the same thing.
“The truth is this, whether under recovery, subsidy or value shortfall any terminology, they mean the same thing. The truth is that the Government thinks when they come out openly, and speak honestly to citizens, it will make citizens hate them. NO! That is where they are getting it wrong. They think those terminologies will douse tension, but it doesn’t work that way.
Difference in price, part of operational cost-NNPC
Earlier in July 2021, this Reporter had contacted NNPC on the issues surrounding subsidy, the Spokesperson, Mr Kennie Obateru at the time, noted that there was no subsidy, as such was not provided for in the budget.
However, he stated that the Corporation currently is faced with under-recovery which was still been carried as part of its operational cost.
His words: “We can only talk about under-recovery. There was no budgetary provision for a subsidy even when we know that Nigerians are buying products, that is; PMS less than what it should be.
“But NNPC has been carrying that on behalf of Nigerians for now and it is part of our operational cost which is why we call it under-recovery. The account is done monthly and in arrears.”
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