Government, states, councils share N2.8tr in six months

The three tiers of government (federal, states and local governments) shared N2.788 trillion between January and June this year, a 38% increase on the N2.019 trillion shared in the first half of 2016.

This disclosure is contained in the NEITI Quarterly Review which focuses on disbursement from the Federation Accounts and Allocation Committee (FAAC).

The review was based on data obtained by NEITI at the meetings of FAAC and data from National Bureau of Statistics, Office of the Accountant General of the Federation, Federal Ministry of Finance and the Debt Management Office.

Out of N2.788 trillion disbursed in the first half of 2017, the Federal Government received N1.09 trillion, 36 state governments received N923 billion while N549.8 billion went to 774 local governments in the country.

A further  breakdown  shows that total releases to the three tiers of government was N430.16 billion in January, N514 billion in February, N496.40 billion in March, N418.82 billion in April, N418.82 billion in May and N462.36 billion  in  June.

However, despite the 38% increase in disbursements in the first half of 2017 when compared with 2016, all the three tiers of government suffered significant revenue decline in terms of projected FAAC disbursement.  “Coupled with the low price of oil is the country’s difficulty in meeting the targeted/budgeted production rate of 2.2 million barrels per day. Production has consistently fallen below two million barrels per day since March 2016. Thus the double “whammy” of low oil prices and lower production that hit the country since 2014 has remained,” the NEITI Quarterly Review observed.

For instance, while the expected FAAC disbursement for the three tiers of government was N4.7 trillion, the actual FAAC disbursement to them was N2.788trillion, representing a shortfall of over 40.67%.  According to the publication “the volatility nature of disbursements to all tiers of government in the first half of 2017 would suggest difficulty in implementing budgets at Federal, State and Local government levels. The volatility in revenue inflows will adversely affect planning and expenditure of government and thus likely hamper efforts at stimulating growth and development”.

The NEITI Quarterly Review further disclosed that a total of N513 billion was spent on debt servicing by the three tiers in the first quarter of 2017. This was against the N1.276 trillion disbursements in the first quarter. This means that debt servicing took up 40.27% of FAAC disbursement for the first quarter of this year.

“The figure reveals that debt servicing as proportion of total FAAC allocations is generally higher in the first quarter of the year, after which it falls to lower levels. Based on this, the figure of 40.27% observed in the first quarter of 2017 might be an upper threshold and it would thus be expected that this figure will be lower for the remaining quarters of the year,” the Report concluded. However, the Debt Management Office (DMO) is yet to provide data on the figure for the second quarter of 2017.

In this direction, the NEITI publication expressed concern that, the nation’s debt in relation to revenues appears to have reached critical levels. It further disclosed that domestic debt servicing constituted 90% of total debt servicing. The Report also remarked that “domestic debt servicing consistently outstrips external debt servicing. In the first quarter of 2015, domestic debt servicing made up over 93% of total debt servicing. This figure did not change much by the first quarter of 2017 as domestic debt servicing was over 92% of total debt servicing”.

On the Paris Club debt refund to the 36 States and Federal Capital Territory (FCT), the NEITI Quarterly Review confirmed that N760.18 billion was released by the Federal government to the 36 states and the Federal Capital Territory Abuja.

The money which was paid in two tranches represents refunds of over deductions from FAAC allocations to states and local governments used for quick payment of debt relief granted to Nigeria by the Paris Club between 1995 and 2002.

The NEITI publication disclosed that Rivers received the highest amount of N44.93 billion followed by Delta with N37.61billion and Akwa Ibom N35.98 billion. Bayelsa got N34.9 billion  while Kano state received  N31.74 billion respectively. The Federal Capital Territory, Abuja received the lowest amount of N2.05 billion.  Details of total Paris Club Refund to the 36 States and Abuja are produced below:

Table: Break down of Paris Club Refunds to States and FCT (N Billions)

The NEITI Review reports that “the Federal Ministry of Finance stressed that the Paris Club  releases  should be used largely by the States for the payment of workers’ salaries, welfare, and pensions which may have been pending since 2014”.

The NEITI Quarterly Review also confirmed that the NNPC has completed the refund of N450 billion owed the Federation Account, as a result of portions of domestic crude receipts withheld by the Corporation from November 2004. This followed the implementation of a payment schedule worked out between the Corporation and the Federation Allocation Accounts Committee.

From the NNPC debt refund which commenced since 2011, a total of N206.242 billion was paid to the Federal Government, N151.446 billion was paid to the 36 States and FCT, while the 774 local governments collectively received N92.311 billion.

NEITI’s interest in providing timely information and data on the FAAC allocations to the three tiers of government is in line with its mandate to monitor and enthrone transparency in the management of extractive industry revenues. NEITI’s is also interested in the FAAC disbursements in view of the fact that over 70% of the funds involved are derived from the extractive sector.