REVENUE ALLOCATION TO FG, STATES & LGS DOWN BY 40% IN 3 YEARS.

Abuja March 16, 2017. The Federation Accounts Allocation Committee (FAAC) disbursed N5.12 trillion to the three tiers of government in 2016 as against the N6.01 Trillion shared in 2015. The figure is 15% short of disbursements in 2015 alone and over 40% less than the aggregated disbursements to the three tiers of government in Nigeria between 2013 and 2016.

These information and data were contained in the latest NEITI Quarterly Review; “FAAC Disbursements in 2016: Review and Projections” released by the Nigeria Extractive Industries Transparency Initiative (NEITI). 

The Review which is the third in the series, focused on disbursements from the federation account to the Federal, States and Local Governments. It also appraised the internally generated revenues of the states in 2016 and capacity to fund budgets.

The NEITI Quarterly Review noted that payments to the three tiers of government have continued to decline by over 40% since 2013. The report observed that “The Federal Government received N3.711 trillion in 2013 and this fell by 43.9% to N2.08 trillion in 2016. Similarly, disbursements to State Governments totaled N3.095 trillion in 2013. In 2016, States received N1.642 trillion, which represented a 46.9% decline on the 2013 figures…Local Governments received N1.011 trillion in 2016, representing over 40% lower than the figure of N1.708 trillion received in 2013”.

On disbursements to the federal government in 2016, the NEITI Publication disclosed that the total FAAC allocations stood at N2.08trillion as against the N6.06 trillion that the federal government budgeted for the year. This represents a drop of 20% when compared to the 2015 figure of N2.6trillion.

The payment covered just about 34% of the budget and was not even enough to meet the recurrent expenditure needs of N2.6 trillion of the FGN last year. The implication according to the NEITI publication was that “the Federal Government would  resorted  to even higher debts to fund the budget…..debt service payments, which accounted for 24.3% of the 2016 budget, increased.’’

NEITI further revealed that revenues accruing to the state governments fell short of their budgets projections; some as much as 30%. These disbursements comprise of gross statutory allocation, 13% share of derivation, Value Added Tax, distribution of exchange gain, NLNG dividend, distribution of excess bank charges recovered and distribution of solid minerals revenue.

The report cited some states like Lagos which had a budget of N662.60bn, against the  total revenue of  N410.5bn  that accrued to the state leaving a shortfall of about N252 billion. On the other hand, Adamawa State had revenue of N41.05 billion against a budget of N130.10 billion while Nasarawa had revenue of N32.5 billion to fund a budget of N77.30 billion.  It further asserted that some states such as Cross River, Sokoto, Borno, Jigawa, Osun and Plateau had revenues below 30% of their budgets in 2016.

Akwa Ibom state received the highest allocation of N116.6 billion from the federation account in 2016 and was closely followed by Lagos and Rivers States with N109.3 billion and 103.98 billion respectively.

The NEITI Quarterly Review also showed that Kwara and Ebonyi states received the least allocations of N30.08 billion and 30.09 billion respectively from the federation account.

The disparities in the total disbursements to state and local governments were also highlighted in the Report. For instance, while three states received disbursements above N100 billion each, 30 states received allocations less than half of that figure (N50bn) in 2016.

On disbursements to the 774 local governments in Nigeria, Lagos state topped the table with a total of N69.29 billion to its 20 local governments, followed by Kano state’s 44 local governments that received a total of N56.16 billion. Bayelsa State received the lowest disbursement of N11.56billion for its 8 Local Governments.  The NEITI Quarterly Review identified allocations to the local governments to include   gross statutory allocation, exchange gain difference, value added tax, and excess revenue from various sources. Others were NLNG dividend, recovery of excess bank charges, excess PPT and solid minerals revenue.  

Another striking feature of the NEITI Quarterly Review is the issue of internally generated revenue by the federation. The NEITI special publication shared the concern of Nigerians for State governments to lessen their dependence on federal allocations through creative means of increasing opportunities for internally generated revenues. “IGR is very low in most states and it is only in two states of Lagos and Ogun that the IGR is higher than FAAC allocations.”

NEITI also noted with concern that the debt profile of the State governments were on the increase; consisting of domestic and external debts as at December, 2015 and June 30th, 2016. For instance, Lagos State has the highest cumulative debt of N603.25 billion as against the state’s revenue of N410.5bn for 2016. The second on the debt table is Delta State with N331.95 billion growing debt as against N142.78 of the state revenue. Osun and Akwa Ibom states took the third and fourth places on rising debt profiles with N165.91 billion and N161.23billion respectively. 

Yobe and Anambra States stood out clearly as States with the least debt burdens. While Yobe was indebted to the tune of N11.74billion, Anambra State owed N20.60billion.  The cases of Osun, Cross River and Delta states raised major concerns in the debt analyses giving the fact that their total borrowings over the years were found to have more than doubled the total revenues accruing to them in 2016. The Report maintained that “Considering that most states already have a high debt burden, the possibility of even higher debts for the states remain quite high”.

The NEITI Quarterly Review noted that ‘‘All three-tiers of the Nigerian Government have been subjected to dwindling and volatile revenue as a result of militant attacks in the Niger Delta and falling/unstable oil prices….’’. It however expressed optimism that with the gradual increase in Oil production and a gradual rise in oil prices from $30.70 per barrel in 2016 to $54.58 per barrel in January 2017 there is hope for the recovery of the economy. “If this rising trend continues, Government revenue will likely increase further. This will improve the ability of both the federal and state governments to fund their budgets”, the NEITI Quarterly Review concluded.  

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