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Government, states, councils share N4.55tr in nine months

The total sum of N4.545 trillion was disbursed as the Federation Account Allocation Committee (FAAC) allocations between January and September 2017. Out of this amount, N1.757 trillion was shared in the third quarter of 2017 as against the N1.377 trillion and N1.411 trillion disbursed in the second and first quarters of the year.

Waziri-Adio

Executive Secretary of NEITI, Waziri Adio

The information is contained in the latest Quarterly Review of the Nigeria Extractive Industries Transparency Initiative (NEITI).

The publication, which contains information and data on FAAC disbursements for the third quarter of 2017 and on mid-year budget implementation, also shows that, between January and September 2017, the federal government received the highest allocation of N1.851.32 trillion, followed by state governments with N1.509 trillion and the 774 local governments with N913.8 billion. The sum of N271.78 billion went to DPR, Customs and the FIRS as cost of revenue collections.

Further analysis shows that the revenues shared to the federating units were higher in the third quarter of 2017 which has been the pattern for some years now.

For instance, while the federal government got N549.41 billion in the second quarter of 2017, third quarter figures were N752.79 billion, an increase of 37.02%. The trend is the same for the states and local governments, which received N586.58 billion and N363.98 billion in the third quarter as against N467.13 and 280.42 billion in the second quarter respectively. The percentage increases between the two quarters for the two tiers of government are 25.57% and 29.80% respectively.

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The Review attributed the reason for the increases in FAAC disbursements to the three tiers of governments in the third quarter to what it called “Positive developments in the oil sector – evident from resurgent oil prices and increased production levels. The third quarter also represents the summer season when global oil demand and consequently oil prices are generally higher than other times of the year and this could possibly explain the higher revenue accruals to the Federation account in these third quarters”.

The NEITI Quarterly Review, which based its analysis on data obtained from FAAC, National Bureau of Statistics, Federal Ministry of Finance and the Budget Office of the Federation, noted that the “upward trend in the FAAC disbursements to the three tiers of governments are encouraging signs which if sustained will improve government expenditures, help to boost economic activities and move the country further away from recession”.

Another major highlight of the report is the high degree of volatility in FAAC disbursements between January and September 2017.

For example, the federal and local governments received highest revenues in July recording as much difference as 75% and 58% respectively between the months with the highest and lowest disbursements. State governments on the other hand got the highest allocations in September with a difference in revenues of about 53% between the high and low revenue months.

“Disbursements to the federal, states and local governments have risen and fallen in alternate months throughout the year, making economic planning and execution of capital projects difficult”, the report stated underlining the need for “diversified sources of government revenue to limit volatility and ensure more stable and predictable revenue streams.”

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Another highlight from the NEITI report is that Nigeria’s revenues in the first half of 2017 were about 49% lower than budgeted figures. While government projected N5.368 trillion revenue flows in its 2017 Fiscal framework for the first six months of the year, actual inflows were N2.712 trillion.

From the report, government’s half year projections were 2.667 trillion for oil and 2.701 trillion for non-oil revenue. However, actual revenue for the first half of the year fell short of projections. “Actual oil revenue was N1.587 trillion, representing a shortfall of N1.079 trillion, implying a 40.4% underperformance. Non-oil revenue fared slightly worse, as only 41.6% of the projected revenue was realized. Actual non-oil revenue totaled N1.125 trillion, indicating a shortfall of N1.575 trillion.”

The Report also pointed out that while government projected that the non-oil sector would outperform the oil sector, the oil sector performed better by as much as 41% in revenues generation raking in N1.587 trillion as against N1.125 trillion for the non-oil sector.

Figures for the three tiers of government were no different. The federal government has hoped for a N2.542 trillion revenue flows for the first half of 2017 but actual revenue was N1.497 trillion. A breakdown of the inflows shows that the oil sector accounted for a larger part of the shortfall with a 60% drop while the non – oil sector underperformed by 49%.

According to the NEITI publication, “Budgeted half-year inflows from the oil sector was N1.061 trillion but actual oil inflows to the federal government was N414 billion. The federal government’s budget estimated half-year non-oil revenue inflows at N705 billion but realized only N352 billion, indicating a 49% shortfall.”

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The Report also compared government’s earnings in 2017 to 2016 and showed that total revenues were higher in the first half of 2017 than the corresponding period of 2016 by 22%.

The report indicates that all sources of oil revenues with the exception of rents recorded positive improvements in 2017 than 2016 first halves. The same goes for the non – oil sector revenues where Value Added Tax (VAT) was the largest contributor to the revenues with a 16% increase over 2016 figures.

The report attributes the development to “increase in economic activities, expansion in the tax base and the improvement in performance of revenue collecting agencies.”

However, the report notes that there was no revenue recorded from solid minerals and dividends from investments funded by FAAC despite the abundant solid minerals deposits in the country.

The NEITI Quarterly Review further analysed FAAC disbursements to the states in the first three quarters of 2017. It observed that the allocations were 42% lower than the states budgetary requirements.

The report notes that “states will have to aggressively raise their IGR in order to be able to actualise their budgets. The alternative is increased borrowing. About half of the states (15 states) have FAAC disbursements as a ratio of budgets lower than 20%”.

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