The latest Quarterly review of the Nigeria Extractive Industries Transparency Initiative (NEITI) indicated that a total sum of N4.545 trillion was disbursed as FAAC allocation to the three tiers of Government between January and September 2017.
NEITI Director of Communication, Dr Orji Ogbonnaya Orji while briefing the press, stated that N1.757 trillion was shared in the 3rd Quarter of 2017. The first and second Quarter figures was put at N1.411 trillion and N1.377 trillion respectively.
How it was shared
As usual, the FG received a large chunk of the allocation of N1.851.32 trillion, followed by the 36 states and 774 local government areas that received N1.509 trillion and N913.8 billion respectively. Giving a further breakdown of the allocation, Dr Ogbonnaya mentioned that the DPR, Custom services and the FIRS received N271.78 billion as cost of revenue allocation.
There was a significant drop of 42% of allocation to the states in the first three Quarter of 2017 due to a drop in total revenue. As a result of this sharp drop, the NEITI Director encouraged states to focus more on raising internally generated revenue (IGR) rather than depending wholly on monthly allocation from the Federal Government(FG). Failure to do this may impact negatively on budget implementation at the state level. Unfortunately though, most states have now resorted to borrowing to fill the deficit as a result of the shortfall.
Trends in FAAC Allocation
A negative trend mentioned by the NEITI Director was the fact that FAAC allocation to 15 states in Nigeria had a ratio of budgets lower than 20%. Following the usual pattern over the years, it was observed that revenue allotted to states and LGs were higher in the 3rd Quarter of 2017. The review showed an increase of 37.02% allocation from 2nd Quarter to 3rd Quarter. At the state and local government level, the percentage increase from 2nd to 3rd Quarter was 25.57% and 29.80% respectively.
The positive development in the oil sector which is the main stay of the nation’s economy was responsible for the increase in FAAC disbursements to the Federal, state and local governments. Giving reason for the usual rise in the 3rd Quarter, Dr Ogbonnaya stated that the global oil demand and subsequent increase in oil prices was responsible.
The NEITI Quarterly review is a derivative of data collected by FAAC, National Bureau of Statistics (NBS), Federal ministry of finance and the Budget office of the Federation. A positive indication as shown by the upward trend in revenue allocation to the three tiers of government are sure signs of a healthy economy which if sustained can accelerate the movement of the country from recession.
Highlighting a major trend in the report as par sharp disparity in FAAC disbursement between January and September 2017, Dr Ogbonnaya mentioned a difference of 75% and 58% between the Federal and Local government allocation in the month under review. State governments on the other hand got the lion share of allocations in September as indicated by a difference in revenue of 53% between the high and low revenue months.
Funding shortfall
As a result of the fluctuation in revenue allocation to the three tiers of government, economic planning has been virtually impossible, as the funds to implement fiscal projects at all levels of government may not be available. The solution therefore lies in diversification of revenue sources to mitigate economic instability and ensure a steady income stream.
Further highlight from the NEITI report showed that the 1st half of 2017 witnessed a drop of 49% between budgeted figures and actual revenue. N5.368 trillion was projected by the FG while only N2.712 trillion actually accrued as revenue in the first six months. Luckily, the disparity between projected and actual revenue for non oil sector in the half year wasn’t much as 2.667 trillion was projected and 2.701 trillion came as revenue.
On the flip side of the review, there was a shortfall in actual revenue for the first half of the year. Actual oil revenue was N1.587 trillion. This figure indicated a shortfall of N1.079 trillion. The significance of this shortfall was that underperformance was 40.4%. Non oil revenue on the other hand did not fare better as underperformance was 41.6%.
The huge gap between oil and non oil sector projected revenue was highlighted in the report. As always, oil sector performed better than its non oil sector counterpart by a whopping 41%. N1.587 trillion was realized from the oil sector while just N1.125 trillion came through the non oil sector. Predictably, the report showed no changes in the three tiers of government in terms of actual revenue and projected.
Not all bad
A comparative analysis of government earning in 2016 to 2017 showed that total accrued revenue in 2017 was higher in the first half of compared to same period covered in 2016 by 22%. The report also indicated all sources of oil revenues except rent, recorded a positive upswing in 2017 compared to 2016 first halves. The same trend was observed in the non oil sector revenues as Value Added Tax (VAT) was highest contribution with an impressive 16% increase over 2016 figures.
These positive developments were attributed to Federal government’s aggressive drive in revenue collection and rapid expansion in tax base of the FIRS. On a rather negative note, the report didn’t mention any revenue recorded from solid minerals and no dividend was declared from investments funded by FAAC.
