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Home Business News

35 States will struggle to fund budgets as Federal Government’s earnings fall

Fakoyejo Olalekan by Fakoyejo Olalekan
May 13, 2019
in Business News, Politics
Federation Allocation Account Committee, Nigeria's 2019 budget, FAAC disbursements
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Thirty-five States will struggle to fund their budgets, as the Federal Government’s earnings declined in the first quarter of 2019. The Federation Allocation Account Committee (FAAC) recorded a drop in its disbursement after posting N1.929 trillion.

FAAC‘s disbursement of N1.929 trillion between January and March of this year showed a drop of 0.45 percent, a slight difference when compared to the disbursement of N1.938 trillion during the same period in 2018.

Despite the decline in its finances for 2019, the N1.929 trillion was higher than the result posted in 2017. There is a recorded 36.7 percent increase when compared to the N1.411 trillion disbursed in the corresponding period in 2017.

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Why the decline matters: The drop in Q1 2019 ended an impressive run of N2 trillion disbursement which lasted for three consecutive quarters between Q2 to Q4 of 2018.

Impact of the decline for the FG: According to report, the Federal Government received N803.18 billion in the first quarter of the year, 1.18 percent lower than the N812.8 billion it received in the same period in 2018. When compared to the N549.1 billion disbursed in corresponding quarters of 2017, it’s 46.2 percent higher.

Impact of the decline for States: The drop means in the first quarter of this year, 36 states shared N675.2 billion. This is a 1.19 percent decline when compared to the N683.4 billion disbursed to the states in Q1 2018. However, it is 48 percent higher than the N456 billion disbursed in Q1 2017.

The story is different for LG: The report showed that while FG and the States recorded a decline in their disbursement in the first quarter of 2019, the Local Governments recorded an increase of 1.28 percent when compared to N393.4 billion disbursed in the first quarter of last year. This means that the LGA’s disbursement is 47.8 percent higher than the amount disbursed to them in Q1 2017.

Reason for the decline: The 0.45 percent recorded in the disbursement for the first quarter of 2019 is blamed on the fall in oil prices. This slightly affected the earnings of the Federal Government.

This was made known in the latest issue of the Quarterly Review of the Nigeria Extractive Industries Transparency Initiative (NEITI).

“Oil prices experienced a downward spiral from November 2018. Oil prices were above $80 per barrel in October 2018 but by December 2018, they had dropped to $57 per barrel. The average oil price for the first quarter of 2019 was $63.17 per barrel.

“Average oil price for the year 2018 was $71.06 per barrel. Thus, oil prices have been considerably lower in the first three months of 2019 than they were in 2018.”

States will struggle to fund budgets: NEITI disclosed that the budget presented by 35 states this year cannot be funded adequately. According to NEITI, even if the net FAAC disbursements to each state in 2017 and 2018 are combined, the funds will still not be enough.

There’s a problem: As usual, both the Federal Government and the States will, once again, depend on external borrowings to fund their budgets. This is despite condemnation that allocations to some ministries and projects which are said to be fraudulent.

Recall that the Senate Committee on Trade and Investment recently uncovered that the sum of N42 billion was allegedly allocated to a private company in the Ministry’s 2019 budget.

However, the Minister of Trade and Investment, Okechukwu Enelamah denied the claims that it intends to allocate such figures to a non-existing private company, stating that the said company ‘Nigeria Special Economic Zone Company‘ is jointly owned by FG and stakeholders which he refused to disclose.

According to a document received by the Senate committee from the Corporate Affairs Commission (CAC), the company’s name is actually Nigeria Sez Investment Company Limited, and it exists as a private entity.

There has always been a criticism of projects in every budget each year, with most of them usually tagged unrealistic. This is because many people believe that the budget serves as a means for the Government to divert funds or ‘scam’ the people, just as London-based Chevening Scholar, Laolu Samuel-Biyi, recently observed.

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Tags: FAAC disbursement for Q1 2019Federation Allocation Account CommitteeNigeria's 2019 budgetStates in Nigeria

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