Does NNPC have the power to defray its operational expenses before remitting the balance of its gross revenue into the federation account? Etigwe Uwa SAN examines this vexed constitutional issue
An issue of national concern which is the subject matter of this short opinion, concerns the question whether a commercial concern such as the Nigerian National Petroleum Corporation (NNPC) is constitutionally or statutorily required to pay all revenue which accrue to it from its operations or undertakings into the Federation Account created by the Constitution of the Federal Republic of Nigeria, 1999 (â€˜the constitutionâ€™). The dispute has come to the fore on account of a memorandum submitted to the Senate Committee on Finance on the â€œNon-Remittance of Oil Revenue to the Federation Accountâ€ by the Governor, Central Bank of Nigeria, Sanusi Lamido Sanusi.
The CBN Governor prefaced his presentation at the Senate hearing and stated:
â€œâ€¦1. The amount of money illegally and unconstitutionally withheld, diverted or spent by the NNPC is in excess of $10.8 billion; and
2. Provide documents showing exactly how this, money was taken from the Federation Account.
In the rest of my letter, I will cover the following areas:
a. NNPCâ€™s response to my allegations
b. Analysis of NNPCâ€™s claims on subsidy
c. Analysis of NNPCâ€™s claim on Oil lifted by the NPDCâ€.
Our intention is to examine the relevant provisions of the extant constitution in order to demonstrate that the NNPC, as a statutory corporation, can maintain accounts, not being the Federation Account, into which proceeds from its transactions may be made. In addition, it will be argued, based on a decision of the Federal High Court (see below), that only those who have a stake in the Federation Account, can act as â€˜whistle blowersâ€™. In other words, having regard to the fact that there are three known beneficiaries to the Federation Account, the Federal High Court decided that only a beneficiary (such as the government of the Federation, a State, or Local Government) can legitimately raise issues with regard to the Federation Account.
Without doubt, section 162(1) of the Constitution provides that the Federation shall maintain a special account to be called â€œthe Federation Accountâ€ into which shall be paid all revenues collected by the Government of the Federationâ€¦â€ It needs to be stated that section 162(1) of the constitution is neither an investment nor a trading account. This is self evident from sub-section 3 thereof by which it is provided that:
â€œAny amount standing to the credit of the Federation Account shall be distributed among the Federal and State Governments and the Local Government Councils in each state on such terms and in such manner as may be prescribed by the National Assemblyâ€.
Relevant to this endeavour is the question of whether the NNPC, being a commercial entity, can pay all its revenue into the Federation Account without committing â€œcommercial suicideâ€? The answer to that simple question underpins the reason for the definition of revenue by the constitution at section 162(10) as:
â€œâ€¦ any income or return accruing to or derived by the Government from any source and includes-
(a) any receipt, however described arising from the operation of any law;
(b) any return, however described, arising from or in respect of any property held by the Government or the Federation;
(c) any return by way of interest on loans and dividends in respect of shares or interest held by the Government of the Federation in any company or statutory bodyâ€¦â€
A combined reading of sub-sections (1), (3) and (10) of section 162 will yield to the conclusion that what the section contemplates is not the totality of income or receipts accruing to a statutory body but its net income. Were a statutory body to remit the totality of its revenue to the Federation Account, the inevitable outcome would be that such revenue would be shared by the Federal, State and Local Governments without any allowance for the costs or investments necessary to realize such gross revenue. This in our view may amount to a constructive fraud against the Federal Government of Nigeria in favour of the States and Local Government Councils. In making the foregoing point, one is not unmindful of the provisions of Section 165 of the Constitution which oblige the states to pay to the Federation an amount equal to such part of the expenditure incurred by the Federation for the collection of taxes and duties which are wholly or partly payable to the State. That Section at least recognizes that the cost of revenue collection ought to be contributed to by the various beneficiaries of such revenue. However Section 165 is limited to taxes and duties. Some of the revenue generated by NNPC consists of profits from its operations which are capital intensive. It is submitted that such costs or expenses must first be defrayed before the balance is paid into the Federation Account.
In the light of this reality, the Supreme Court in ATTORNEY-GENERAL, OGUN STATE v ATTORNEY-GENERAL, FEDERATION (2002) 18 NWLR (pt.798) 232 held as invalid the suggestion that all income accruing to the Federal Government and its agencies ought to be emptied into the Federation Account. In that case, one of the reliefs sought by the Plaintiffs was for.
â€œA declaration that the Federal Government is mandatorily obliged by the combined effect of section 162(i) and (iv) of the constitution of the Federal Republic of Nigeria, 1999 to pay into the Federation Account all the proceeds and income, save those exempted under section 162(i) accruing from the privatisation of government enterprises, from stamp duties, capital gains tax and other income accruing to or derived by the Federal Government from any other sourceâ€. (Emphasis ours)
The Supreme Court declined and refused to make the declaration sought. Uwais CJN amplified the reasons in words that are memorable. He said:
â€œWith regard to the privatisation of Government enterprises by the Government of the Federation, section 20 of the Public Enterprises (Privatisation and Commercialisation) Decree No 28 of 1999 provides that the Bureau of Public Enterprises shall establish and maintain a fund from which shall be defrayed all expenditure incurred by the Bureau. The fund so established is to be financed by subvention from the Government of the Federation, loan or grant to the Bureau by the Governments of the Federation or State or Local Government; all subventions, fees and charges for services rendered by the Bureau including publications, and all other assets which may from time to time accrue to the Bureau. By section 21, subsection (2) of the Decree, the Bureau shall cause the net surplus of receipts and payments made on it in every year to be paid to the Government of the Federation.â€ (Emphasis, Ours)
The irresistible inference to be drawn from the reasoning of Uwais, CJN in his concurring judgment is that the Federation Account cannot swallow â€˜lock, stock and barrelâ€™ all manner of funds including operating capital and costs. We need to state that the scope and ambit of section 162 of the Constitution as well as other sections of the Constitution concerning public revenue have been dealt with in major judgments of the Supreme Court such as AG ABIA STATE v AG FEDERATION (2003) FWLR (pt.152) 131; AG FEDERATION v AG ABIA STATE & 35 OTHERS (No.2) (2002) 6 NWLR (pt.764) 542 and the comments herein are not intended to extend to issues which do not arise from the relevant questions, set out above.
The assumption in the foregoing paragraph finds ample support in the provisions of sections 5,6 and 7 of the NNPC Act. Accordingly, while section 5 makes provision for the General Duties of the Corporation, section 6 details the Powers of the Corporation. Inevitably, section 7 of the Act makes Financial Provisions. Significantly, within the ambit of section 7 of its enabling Act, the NNPC can find ample statutory authority to defray â€œâ€¦ all expenses incurred by the corporationâ€. (Emphasis ours).
It is instructive that the NNPC Act on which reliance is placed is deemed to be an existing law pursuant to relevant provisions of the extant Constitution and consequently, an Act of the National Assembly. Until it is repealed by another Act, or struck down by the judgment of a competent court, the NNPC is entitled to rely on its provisions in order to effectuate its mandate.
Who can complain about any infraction on the Federation Account?
By virtue of section 2 of the Central Bank of Nigeria (Establishment) Act CAP.C4 LFN, the objects of the Bank are said to be-
a) ensure monetary and price stability;
b) issue legal tender currency in Nigeria;
c) maintain external reserves to safeguard the international value of the legal tender currency;
d) promote a sound financial system in Nigeria; and
c) act as banker and provide economic and financial advice to the Federal Government.
The question is whether in the context of the â€˜objects of the Bankâ€™, it is within the purview of the Bank to question remittances from the NNPC or in fact any other Statutory Body. The question can only be best answered by reference to the decision of the Federal High Court in Suit No. FHC/ABJ/CS/330/2007 â€“ REVENUE MOBILISATION, ALLOCATION & FISCAL COMMISSION v ATTORNEY-GENERAL OF THE FEDERATION & 4 OTHERS â€“ a suit in which the Central Bank of Nigeria was 5th defendant. It is to be noted that the matter centred on the following claims by the Plaintiff, namely:
ii. A Declaration of this Honourable Court that having regard to Sections 80(3), 162(3) and 165-167 of the Constitution of the Federal Republic of Nigeria 1999, and having further regard to the decision of the Supreme Court in ATTORNEY GENERAL OF THE FEDERATION v ATTORNEY GENERAL OF ABIA STATE & 35 OTHERS (2002) 6 NWLR pt. 764 pg.542, the monthly direct deductions from the Federation Account for:
e. 7% monthly deductions from the Federation Account as cost collection of revenue in favour of the Nigerian Customs Service.
f. 4% monthly deductions from the Federation Account as cost of collection or Revenue in favour of Federal Inland Revenue Service running into billions of Dollars and Naira by the 2nd Defendant through direct first line charge on the Federation Account are unconstitutional.
In the light of the foregoing, all the defendants at the Federal High Court, that is to say, Attorney-General of the Federation, Federal Ministry of Finance, Nigerian Customs Service, Federal Inland Revenue Service and the Central Bank of Nigeria filed their respective Notices of Preliminary Objection complaining about the locus standi or legal capacity of the Plaintiff to litigate on the Federation Account. The Federal High Court (Per Bello J., as he then was) held inter alia that:
â€œThe Plaintiff in this case not being a beneficiary of the Federation Account…I hold that only the beneficiaries of the Federation Account as mentioned earlier, who are alive and existing, have the requisite locus standi to bring any action against the Defendants to stop any alleged illegal Deduction from the Federation Accountâ€¦â€ [Judgment was delivered on 3-11-08].
Having regard to the fact that the Federal High Court refused to grant the Revenue Mobilization Allocation and Fiscal Commission the leverage to challenge dealings on the Federation Account, would the Central Bank of Nigeria, through its Governor, have a better standing? The point to note is that the amended Constitution of the Federal Republic of Nigeria, 1999 establishes 14 Federal Executive Bodies for the federation. Although the Revenue Mobilisation Allocation and Fiscal Commission is one of such Bodies established by the constitution, the Central Bank of Nigeria is not. On that score, it is possible to argue that the Central Bank is an outsider in respect of matters arising from the Constitution but that argument will not be pursued here. What will be emphasized is that based on sensitive documents which have been ventilated in court, the execution and implementation of the judgment of the Supreme Court in ATTORNEY GENERAL OF THE FEDERATION v ATTORNEY GENERAL OF ABIA STATE & 35 OTHERS (2002) 6 NWLR (pt.764) pg 542 with regard to the Federation Account has remained problematic and thus a bugbear for the Federal Government and its agencies. Consequently, all the agencies that generate revenue for the Federation Account have remained adamant that not all revenue can be paid into the Federation Account. That view has not been contested but the problem has always turned on how to prevent an infraction of the constitution (S.162). Perhaps reliance for that view may be found in the definition of income in Blackâ€™s Law Dictionary as being the â€œreturn in money from oneâ€™s business, labour, or capital invested, gains, profits, salary wages etcâ€. â€œReturnâ€ in the some Dictionary is said to mean â€œprofit on sale or income from investmentsâ€. â€œProfitâ€ is â€œgross proceeds of a business transaction less the cost of the transactionâ€â€. Our earlier view that the contemplation of the Constitution (in section 162 thereof) is that the NNPC can only remit profits to the Federation Account is sustained. It is our humbly held view that the controversy can only be laid to rest through an application to a court of competent jurisdiction.
The inevitability of the need to seek clarification from a court of law concerning the scope and ambit of section 162 of the Constitution qua what a statutory corporation such as the NNPC may remit to the Federation Account is self evident from the nature of the claims formulated by the Revenue Mobilization Allocation and Fiscal Commission at the Federal High Court. The relevant claims are to be found in paragraph 2.10 vii & viii and 2.20 i) a) & (f); ii) e) & f); vii and viii. Those claims relate to cost of collecting revenue and the source of funding. Had the Federal High Court found the Revenue Mobilization Allocation and Fiscal Commission as vested with the requisite standing to probe into dealings on the Federation Account, this controversy would probably have been laid to rest. The issue having not been resolved will remain within the purview of the NNPC and it ought to find the leeway in the confines of its enabling statute.
The attempt herein has been to examine the context of section 162 of the constitution vis-Ã -vis the operation of a statutory corporation such as the NNPC which is engaged in business. In sum, it is our humbly held view that the constitution does not command a commercial enterprise to cripple itself. Rather, it is clear that the NNPC is entitled to defray its expenses from funds which it maintains before a resort to section 162. This is a short hand way of submitting that the NNPC must operate in the commercial sense in which cost is separated from profit.