- Combined Net FAAC Allocations for 2017 and 2018 Inadequate to Fund 2019 Budgets of 35 states
- Total Revenues to States for 2017 & 2018 Inadequate to Fund 2019 Budgets 0f 28 States.
- Disbursements Dropped Below N2trillion First Time Since Q2 2018.
The fall in oil prices slightly affected government earnings in the first quarter of 2019, as Federation Allocation Account Committee (FAAC) disbursed N1.929trillion between January and March this year. The figure indicates a 0.45% decline from the N1.938trilion disbursed for the same period in 2018, but 36.7% higher than the N1.411trillion disbursed in the corresponding period in 2017.
The information is contained in the latest issue of the Quarterly Review of the Nigeria Extractive Industries Transparency Initiative (NEITI). Total FAAC disbursements in Q1 2019 ended the recent trend of over N2 trillion disbursements which lasted for three consecutive quarters of Q2 to Q4 2018.
A breakdown of the disbursements shows that the Federal Government received N803.18billion in the first quarters of this year. This was 1.18% lower than the N812.8billion the Federal Government received in the same period in 2018 and 46.2% higher than the N549.1 billion disbursed in the corresponding quarters of 2017.
A further breakdown shows that the 36 States shared N675.2billion in the first quarter of this year, representing 1.19% decline on the N683.4 billion disbursed to the states in Q1 2018 but 48% higher than the N456billion disbursed in Q1 2017.
From the review, only the N398.44 billion disbursed to local governments in Q1 2019 was higher by 1.28% when compared to N393.4 billion disbursed in the first quarter of 2018, and 47.8% higher than the amount disbursed to them in Q1 2017.
The NEITI review attributed the reduction in FAAC disbursements to drop in oil prices. “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. Average oil price for the first quarter of 2019 was $63.17 per barrel. Average oil price for 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”, the Review stated.
The last issue of the NEITI Quarterly Review had projected continued increase in disbursements for 2019 based on the expectation that oil prices and oil production would continue to rise.
Another striking disclosure in the NEITI Quarterly Review is that this year’s budgets as already presented by 35 states cannot be adequately funded even by combined net FAAC disbursements to each state in 2017 and 2018. In addition, the NEITI Review also noted that total state revenues (FAAC and Internally Generated Revenue) in 2017 and 2018 cannot fund 2019 budgets of 28 states.
According to the NEITI publication: “there is no state whose net FAAC disbursements in either 2017 or 2018 can adequately finance their budgets for 2019, Net disbursements to states in 2017 as a percentage of the 2019 budgets ranged between 2.25% (Cross River) and 43.1% (Yobe). Also, net disbursements to states in 2018 as a percentage of the 2019 budgets ranged between 3.54% (Cross River) and 57.7% (Yobe). Thus, clearly, no state can finance its 2019 budgets solely based on FAAC disbursements”.
The gap in the ability of FAAC disbursements to finance state budgets has made it inevitable for most of the states to rely more on borrowing as against the urgency of embarking on creative measures to improve internally generated revenues (IGR). NEITI Quarterly Review listed only three states as positive examples in IGR. The states are Lagos, Rivers and Ogun states.
Similarly, the NEITI publication identified Yobe as the only state that can fund its 2019 budgets from combined FAAC allocations for 2017 and 2018. It also listed Enugu, Kaduna, Delta, Yobe, Lagos, Kano, Nasarawa, and Rivers among the states that can fund their budgets from their combined revenue for 2017 and 2018. It however, observed that these eight states are just in slightly better position than others in terms of capacity to fund their budgets.
On the share of the FAAC disbursements by each of the 36 States, the NEITI Quarterly Review observed wide disparities. For instance, Delta state received the highest allocation of N55.19billion, while Osun state received N5.11billion, indicating 980% difference.
Another significant revelation of the NEITI publication is how huge sums were being deducted directly from FAAC allocations of some states to service their debt obligations. For instance, a sum of N7.27 billion was directly deducted from Osun state allocations while Cross River State has 53% similar deductions from its allocations.
The latest edition of NEITI Quarterly Review, therefore cautioned the three tiers of government to exercise some restraint in their expenditure profiles and continuous dependence on oil revenues to fund budgets. The publication warned that dependence on oil exports given its volatility is largely unsustainable and will continue to make planning and budgeting difficult.
The table below shows details of 2019 State Budgets and Total Net FAAC Disbursements in 2017 and 2018.
|States||2019 Budget (N billions)||Total Net Disbursements in 2017 (N billions)||Total Net Disbursement in 2018 (N billions)||Total Net Disbursement in 2017 as a % of 2019 Budget (%)||Total Net Disbursements in 2018 as a % of 2019 Budget (%)||Total Net Disbursement in 2017 and 2018 as a percentage of 2019 Budget (%)||Total revenue in 2017 as a % of 2019 budget (%)||Total revenue in 2018 as a % of 2019 budget (%)|
Sources: National Bureau of Statistics, Accountant General of the Federation, Fiscal Disbursements Division @ NEITI
The NEITI Quarterly Review is designed to provide timely information and analysis on FAAC disbursements to the three tiers of government. The publication is a tool to support citizens’ advocacy, promote constructive debate, information and enlightenment in tracking the utilization of funds for purposes of development. NEITI’s interest in FAAC disbursements and the statutory recipients is in view of the fact that over 60% of the funds are derived from the extractive industry.