The three tiers of government may have to be more conservative in their budgetary estimates, as Federation Accounts Allocation Committee (FAAC) income for the first half of 2017 is 40% lower than budgeted estimates. Data from Issue 4 of the NEITI Quarterly review show the three tiers of government received actual FAAC disbursements of N2.7 trillion, against the expected inflow of N4.7 trillion. FAAC is the committee comprising Federal, State and Local Government officials who meet monthly to share revenue.
Reasons behind the huge disparity
Tussle between the executive and legislative arms of government leads to unrealistic budget estimates. While the government may want a trim budget, the legislators usually push for several projects for their constituencies. In order to accommodate various interests, the executive usually accommodates modifications by the legislature. Government budgets also tend to be less prudent compared to the private sector.
The Federal Government has consistently set budget estimates. While government has struggled to meet the target of 2 million barrels since March 2016, the government continues to use that figure for its budget estimate. Militant attacks lead to downtime as oil facilities are often badly damaged, taking months to repair. The advent of shale oil, has also lead to crude oil prices trending lower.
Implication if this continues
If the trend continues, all arms of government could face difficulties in executing budgets.While the Federal Givernment has the leeway to borrow its way, states and local governments could face a financial crisis. The Buhari administration has had to bail out states and local governments that could not meet salary and pension obligations. A total of N760 billion has been disbursed to state and local governments so far as bail out funds.
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