An economics expert, Dr. Afolabi Olowookere, said oil revenues, in terms of contribution to the federation account, fell from 46.9% in 2017 to 7.4% in the first half of 2022.
He said that overall, the federation account’s share of total distribution had dropped from 81.4% in 2017 to 66.1% in 2022.
Olowookere added that the group’s share of Value Added Tax (VAT) rose steadily from 18.6 percent to 33.9 percent during the period.
According to him, the share of oil has been falling and is expected to continue to fall, while VAT has been gaining its share.
“Gas flaring penalty revenue increased from N3.8 billion in 2017 to N98.6 billion in 2021, while contributing N39.2 billion in the first half of 2022.
“Overall, the revenue projection has been much higher than the amount realized on the various components of oil revenue,” he said.
However, Olowookere said that gross profit from crude oil and gas sales performed well above projections, except for 2020 and 2019, with negative variations of 38.1 percent and 62.1 percent, respectively.
He said that apart from 2020, actual oil revenues had been more than 50 percent lower than their budgeted values.
Olowookere added that in terms of contribution, oil and gas gross profit has decreased over time, PPT and gas revenue as well as oil and gas royalties have increased their share.
He listed the key pillars of the PIA as a national grid system for acreage management, oil mining leasing, exploration and prospecting licenses, frontier exploration, and host community development funds.
Others included them as a midstream and downstream gas infrastructure fund, tax on hydrocarbons, tax on company profits, royalties, fines and sanctions.
He said the implications of the PIA on federation account revenue could be examined through a few channels including the establishment of regulatory agencies, multiple agencies and the cost of collection.
He listed other channels such as NNPC Limited and its business operations, Remittances to the Federation Account Allocation Committee (FAAC) vs. Consolidated Revenue Fund (CRF), Newly Created Funds in PIA and FAAC, PIA and New Taxes and PIA on Subsidy made out of fuel.
“If deregulated properly, the elimination of the payment of subsidies implies a higher FAAC and more revenue for the government to provide basic services.
“Despite these provisions, the government still continues to pay subsidies for certain reasons.
“While section 31(d) of the PIA may suggest the removal of subsidies, it is not impossible that the process of providing a price and tariff framework and advice on trade matters will lead to some price controls or reintroduction of subsidies. .
“Sections 32(e), 32(f) and 64(m) can be used to justify the continued payment of the subsidy,” it said.
He stressed that it was imperative to have the courage to remove the subsidy, but it should be done in a way that did not add further burden to citizens who were already stressed due to harsh economic realities.
Source Credit: NAN