By Bassey Udo
A Federal Executive Council (FEC) committee is currently reviewing the, the Minister of Finance and Coordinating Minister on the Economy, Wale Edun, has said.
The Minister who confirmed this during a media briefing on the state of the nation’s economy in Abuja on Friday said some of the affected agencies were taking more revenues that should go into the Federation Account as cost of collection.
He said the decision to review the template for the cost of collection was informed by the observation that these agencies were taking more than they actually needed, resulting in increased recklessness in resource utilization.
The FEC committee, the Minister said, has already included in its report that findings have shown that these agencies were basing the calculation of their cost of collection on the overall collection, and not on their need, costs or budget.
Relating to the recent Executive Order, the Minister said the issue was all about looking at deductions by these agencies not only for costs of collection, but also deductions from the Federation Account, PIA deductions, and management fees.
Under the new arrangement as spelt out in the EO and in line with the provisions of the relevant financial regulations under the Fiscal Responsibility Act, no matter what the likes of the NUPRC, NNPC, NRS or others collect, they would be entitled to spend a maximum 50%, while the surplus must be remitted to the government.
He said the government was not looking so much at that the percentage of what the revenue generation agencies are allowed to spend, but at the quantum, by trying to ensure they are not spending more than their budget, because they are restricted by the Fiscal responsibility Act.
“So, they cannot spend 100% of what they collect. They cannot say their budget is 100% of what they collected. There must be some checks and balances,” he said.
“The way we are going is that you will see some agencies have more money than state governments. That must stop. Even before this Executive Order came out, there was already a report to the Federal Executive Council looking at cost of collection and the handling and the quantum of that, all in an attempt to conserve the money for investment in social services, critical infrastructure and public services,” the Minister said.
He confirmed that a forensic audit of the Nigerian National Petroleum Company Limited (NNPCL) was currently ongoing to determine the amount of the organisation’s underpayment to the Federation Account over the years.
The recent Executive Order, he explained, was designed to increase NNPCL’s oil revenue remittance into the Federation Account and make more money available for distribution to the three tiers of government.
Also, he said the federal government was currently engaging with investors in the capital market on concerns expressed over newly introduced 30 percent Capital Gains Tax.
He said the government was determined to make the best of the Tax Act, which came into effect last month, to forestall it becoming a disincentive to any category of investors in the country.
“Whether investing private equity or in the public markets, short-term fixed income markets and enjoying relatively high interest rates, we like patient capital by investors who invest in facilities, creates jobs and adding value to the Nigerian economy, and help reduce poverty.
“So, it’s not just private equity that we’ll focus on, the Tax Implementation Committee will engage them, to have a dialogue on this particular issue,” he said.
Mr. Edun reiterated the impact of elevated cost of borrowing abroad on the Nigerian economy due to the unfavourable credit rating of developing countries and urged Nigerians to mobilise and invest domestic resources in the Nigerian economy.
On the ongoing forensic audit of NNPC as mandated by the Federation Account Allocation Committee meeting, the Minister said the FEC had demanded that the deductions from the Federation Account, and in particular, the costs of collection and the amounts that were being charged for actually doing that task.
Within that context of what should come into the Federation Account and what was going elsewhere, he said the President, who is the owner of the executive order, has directed the immediate flow of three elements, management fee, frontier funds and gas flare penalty, directly to the Federation Account.
“It does not prejudice anything else that is ongoing, whether at the National Assembly or the legislature, or any other action that is looking at this all-important area of the Federation Account, in terms of the accuracy, the transparency, and the accountability of the funds that are going to flow into it.
He said the measures spelt out in the EO were not interim measure, as a committee that has been set up to implement it efficiently is scheduled to meet this week.
In the context of what is happening internationally, Edun said elevated commercial rates, interest rates, and rating agencies that are not rewarding the commitment of developing countries like Nigeria to faithfully meeting their international obligations, and also the fight against inflation, and high cost of living, particularly as it affects the poorest and most vulnerable who cannot jack up their prices in response to inflationary trends.
Within that context, he said there was a need to focus on domestic resource mobilization, rather than debt financing that is not self-paid, adding that there are project finance where you borrow and the project pays for itself.
“That is the type of borrowing we can do. But it’s the borrowing that squeezes the ability to spend on health, to spend on education, and even to spend on critical infrastructure and other public services.
With investment in technology, he said all revenue-earning agencies should be on the same technical platform on which to collect funds so that everybody would see how much somebody was meant to pay, how much he has paid, and how much he is owing, as opposed to a situation where somebody makes a payment, and nobody knows whether it’s 50% he’s paid, or 20%, or whatever.
