The Nigerian Extractive Industries Transparency Initiative (NEITI), in its quarterly review, has announced that the Federation Accounts Allocation Committee (FAAC), shared the sum of N1.945 trillion to the Federal Government (FG), State Governments, Local Governments, and others in the first quarter of 2020.
This is the highest first quarter (Q1) disbursement since 2014. The disbursements since 2015 were N1.648 trillion in Q1 2015, N1.132 trillion in Q1 2016, N1.411 trillion in Q1 2017, N1.938 trillion in Q1 2018, and N1.929 in Q1 2019.
This was disclosed in a press statement that was signed by NEITI’s Director, Communications and Advocacy, Dr. Orji Ogbonnaya Orji, on Monday, May 11.
The press statement, which was seen by Nairametrics, also stated that lower remittances have been projected for the rest of 2020 due to the impact of the coronavirus pandemic. The 3 tiers of government are projected to struggle with revenues and so will need innovative approaches to weather the approaching storm.
A breakdown of the disbursements shows that N791.4 billion was allocated to the Federal Government, N669 billion went to the State Governments and about N395 billion was allocated to the 774 Local Governments. The balance went to the North East Development Commission, the Excess Crude Account, Federal Inland Revenue Service (FIRS), Nigerian Customs Service (NCS), and the Department of Petroleum Resources (DPR).
The review examined FAAC’s disbursements in Q1 2020 and made projections on the possible impacts of Covid-19 on government revenue
It noted that, “While total disbursements in Q1 2020 were slightly higher than Q1 2019 and Q1 2018, disbursements to the 3 tiers of government in Q1 2020 were slightly lower than Q1 2019 and Q1 2018. This is due to transfers to other accounts in Q1 2020 which were not done in either Q1 2019 or Q1 2018. These include allocations to the North East Development Commission and transfer to Excess Crude Account.”
The report noted that with the exception of 2018, the general trend since 2015 has been that total disbursements usually decline in the second quarter, before increasing in the third quarter. With the COVID-19 pandemic and its impact on the economy, it is expected that the disbursement will decline in the second quarter.
For Q1 disbursement, Osun state has the lowest allocation of N6.44 Billion, whereas Delta state has the highest allocation of N52.03 billion. This represents a difference of 708%.
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According to the report, 31 states received less than N20 billion net FAAC disbursement in Q1 2020, meaning that only 5 states received more than N20 billion. The states are Lagos (N26.23 billion), Bayelsa (N35.14 billion), Rivers (N39.99 billion), Akwa Ibom (N40.61 billion), and Delta (N52.01 billion) respectively.
On the prospects of FAAC disbursements for the rest of the year due to the impact of COVID-19, the review remarked, “In light of the double whammy of declining oil demand and oil prices as a result of COVID-19 pandemic, government revenue would likely continue to fall in subsequent months. As global crude oil prices plummet in the midst of the global oil supply glut arising from lockdown of activities in many countries of the world, all tiers of government will struggle to fund their 2020 budgets.”
The report called for innovative and concerted efforts on the part of governments at all levels to mitigate the impact of COVID-19, not just on revenues but also on the economy as a whole.
NEITI welcomed the measures taken by FG in this direction. These include $150 million from the stabilization fund to supplement FAAC disbursements, initiating modalities for states to benefit from debt and interest moratorium, the review of this year’s budget to reflect current realities, and $3.4 billion emergency facility from IMF.
While NEITI, applauded the proactive interventions by the FG, it urged State Governments to emulate the Federal Government’s initiatives by making adjustments to their revenue and expenditure plans.
Sell-off of shares by investors extend Flourmillers loss on NSE to N25 billion
Nigerian Flour millers on NSE suffer a decline as wary investors offload shares.
The sell-off of shares on the Nigerian Stock Exchange has triggered an N24.9 billion loss in the market capitalization of Flour Millers since the beginning of February, as wary investors offload.
It is important to note that the Nigerian Equity Market has been on the downward trend since the beginning of February, as wary investors sell off stakes in companies as the yields in the money market become attractive.
The results of this move led to a decline in the shares of companies listed on the Nigerian Stock Exchange, including a decline in the shares of Flour millers listed on the bourse.
A review of the performance of the stocks of these Flour millers on NSE revealed that the market capitalization of FLOUR MILLS, HONYFLOUR, and Northern Nigeria Flour Mills from the open of trade on February 1 till the close of trading activities on February 24 has declined from N154 billion to N129 billion.
How they have all performed
FlourMills has declined from N142.3 billion to N118.3 billion. However, the market cap of Honeywell Flour Mills has also declined, albeit marginally from N10.31 billion to N9.91 billion, while that of NNFM has declined from N1.72 billion to N1.25 billion. When added up, the three millers have lost N24.85 billion in market capitalization.
However, Flour Mills, the largest miller on NSE lost the most with N23.98 billion, as a percentage of market capitalization. Flour Mills is down by 16.85%.
At the end of trading activities on the floor of the Nigerian Stock Exchange, the shares of Flour Mills declined by 6.9% to close at N28.85 per share, as investors sell off 5,029,161 ordinary shares of the company worth N143,009,264.10.
Shares of Honeywell at the close of trading activities today declined by 1.6%, while shares of Northern Nigeria Flour Mills remained unchanged at N7.02 per share.
The Consumer good index to which the Flour millers belong has fallen by 6.1% year since the beginning of February, compared to the Nigerian Stock Exchange All Share Index -5.17%.
FG says Finance Bill 2020 will check inflation
The Finance Minister has stated that the reduction of import duties on vehicles will subsequently reduce transport fares and food prices.
The Federal Government has said that the Finance Bill 2020 was designed to reduce import duties on some commodities, including vehicles, thereby checking inflation.
This is as the Bill was part of measures to make transportation affordable, thereby reducing the cost of foodstuff across the country.
According to a report from the News Agency of Nigeria (NAN), this disclosure was made by the Minister of Finance, Budget and National Planning, Zainab Ahmed, while answering questions from State House correspondents in Abuja on Wednesday.
Ahmed explained that her Ministry advocated and got approval for a reduction in the import duties charged on vehicles precisely to check inflation trends.
What the Minister for Finance is saying
The Minister expressed concerns over the inflation rate in the country, saying inflation was high at 16.7% and still inching up gradually over the last couple of months.
Ahmed said, “When you look at the components that constitute inflation in our country, the largest contributor is food inflation and … if you decouple it, the largest contributor to food inflation is the cost of transport.
“We now look at how do we reduce the cost of transport because we can’t give every Nigerian money to pay for their transportation fares. We figured that one of the good ways to do it is to increase the acquisition of mass transit vehicles and to reduce the acquisition cost of vehicles and tractors that are used for productive purposes like agriculture.”
She expressed optimism that the reduction of the import duties on vehicles, when fully operational, would boost mass transit activities and subsequently reduce transport fares and food prices.
She said, “So the reason why we reduce those duties is to reduce the cost of transportation.
”So, once this implementation takes full effect, we are hoping that we’ll be able to see more tractors coming into the country, more mass transit buses coming to the country, reducing the cost of transportation as a result, and also having an impact on food prices.”
What you should know
- It can be recalled that as part of its bid to introduce tax incentives in the face of the economic downturn caused by the coronavirus pandemic, the Federal Government in November 2020, through the signed Finance Bill 2020, proposed the slash of import duties for tractors, buses and other motor vehicles from 35% to 10% and 0% to further help cushion the socio-economic conditions in the country.
- The Minister for Finance, Budget and National Planning had explained that the need to reduce food inflation figures through one of the causative factors of high production cost, which is transportation, inspired the bill.
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