NNPC, CBN Disagree on Public Funds
Withdrawal will hurt us - NNPC _You've no choice - CBN
By Mike Oduniyi and Ayodele Aminu
The Nigerian National Petroleum Corporation (NNPC) and the Central Bank of Nigeria (CBN), are headed on a collision course over the withdrawal of N46 billion lodged by the state oil company in some commercial banks.
In a bid to control inflation as well as ensure stability of the naira through mopping up of excess money in the system, the CBN had last month directed some government parastatals to withdraw their deposits with commercial banks. The CBN direction coincided with its announcement of N25 billion new capital base for banks.
But in a firm response to the CBN directive yesterday, the NNPC said withdrawing its money in the banks now, will hurt its operations and might create chaos in the petroleum products distribution system.
The NNPC, simply the biggest government parastatal, is said to have lodged the sum of N46 billion in commercial banks.
"Apart from the fact that we are not aware of the CBN directive because we have not been written directly, withdrawing the money will hurt our operation," NNPC spokesman, Dr. Levi Ajuonuma, said.
"This fund is not surplus money. It is operational money that is used for asset maintenance, to carry out turn around maintenance on our facilities and is deployed to subsidise fuel supply," he added.
According to the NNPC spokesman, the money in question is to be used "as at when due and not to be tucked away in form of deposits or savings."
Giving the precarious fuel supply and distribution situation due to rising crude prices in the international market, the NNPC needed such funds to meet its obligations to contractors, traders and marketers, he added.
But the CBN in a swift reaction yesterday said that the NNPC had no choice but to comply with the directive on public funds withdrawal.
The CBN Deputy Director, Corporate Affairs, Mr. Tony Ede, told THISDAY that the NNPC management was among the first of the government parastatals to be communicated on the Federal Government's directive on public funds withdrawal.
"We met with the management and they agreed to bring the funds to CBN. But after waiting for two weeks without response, we have given them a fresh deadline which expires on Friday," Ede said.
Ede said the CBN had already written to the banks holding NNPC money that their account with the apex bank would be debited by next Monday, if NNPC failed to withdraw the funds.
"However, we are not debiting the banks of the whole money (N46 billion)," Ede added.
The NNPC was among the four parastatals directed to return a total sum of N74.5 billion to the CBN. Others were the Nigerian Petroleum Technology Development Fund (NPTDF), Nigeria Telecommunications Limited (NITEL) and the Bureau for Public Enterprise (BPE).
Ede said the NPTDF had returned N8 billion while NITEL was exempted as its funds were tied to loan facility.
The banking system had been thrown into turmoil after the CBN began the withdrawal of public sector funds. While the CBN said it had only withdrawn N8 billion of the total N74.5 billion earmarked for the exercise, banks said all the N74.5 billion public sector funds had been withdrawn thus precipitating crisis in the sector.
Ede attributed the on-going problems to banks' dependence on inter- bank market transactions. The CBN, according to its spokesman, had even tried to moderate the impact of the withdrawal of public sector funds as contained in its 2004/2005 monetary policy guidelines, by first deciding on withdrawing only capital funds lodged by the parastatals and leaving funds for recurrent expenditures
"The parastatals will have access to their funds with the CBN any time they want it," Ede added.
Public sector funds accounted for over 80 per cent of the total deposit base of most of the small and medium sized banks. The CBN said it was withdrawing them to reduce liquidity position of the economy to check rising interest rates.
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