FAAC Allocations Dips 31% in Six Months – NEITI

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Governance at the three tiers of government in Nigeria is likely to suffer as revenue from the Federation Accounts Allocation Committee declines

By Anayo Ezugwu  |  Nov 7, 2016 @ 01:00 GMT  |

DISBURSEMENTS from the federation account to the three tiers of government plunged by 31percent in the first half of this year compared to the corresponding period of 2015. According to the Nigeria Extractive Industries Transparency Initiative, NEITI, the drop in revenues may negatively impact budget implementation across the three tiers of government this year, increase the size of budget deficits, and deepen the debt burden.

NEITI stated this in its maiden quarterly review entitled: “FAAC Disbursements in the First Half of 2016 and Possible Implications”.  It analysed disbursements by the Federation Accounts Allocation Committee in the first halves of 2015 and 2016, and highlighted possible implications for public governance and management in the country.

The publication stated that revenues shared to the federal, states and local governments were less by over N800 billion from N2.89 trillion in the first half 2015 to N2.01 trillion in a similar period this year. “This 30.9 percent decline reflected in lower allocations across the board. The total disbursement to the federal government fell from N1.23 trillion in the first half of 2015 to N854 billion in the first half of 2016.

“This represents a 30.9 percent decline. Total disbursements to the states fell by 30.5 percent from N1.009 trillion in the first half of 2015 to N701 billion in the first half of 2016. For local governments, allocations from FAAC dropped by 26 percent from N580.63 billion to N429.43 billion.”

This latest report coincides with the federal government’s report of a decline in revenue in September. Kemi Adeosun, minister of finance, had on Thursday, October 20, said the revenue allocation to federal, states and local governments for September declined by N90.2 billion. She attributed the decline to the loss of $45.5 million in federation export sales, despite the increase in average price of crude oil from 46.06 dollars per barrel in May to $48.4 in June.

“Force Majeure was declared at Bonny Terminal and there was a subsisting Force Majeure at Forcados Terminal.  Shut-in and Shut-down of pipelines for repairs and maintenance also contributed to the drop in revenue. Also, there were decreases in the volume of dutiable imports receipts from Joint Venture Cash Call, Foreign Companies Income Tax and Value Added Tax,” she said.

Giving a breakdown of how the N420 billion revenue for September was generated, Adeosun said N250.9 billion was from the distributable Statutory Revenue of the month. She added that N6.33 billion was refunded by the NNPC to the Federation, N63.4 billion from the Excess Petroleum Profit Tax account, exchange gain of N41.4 billion and VAT, N64.2 billion.

The minister said after deductions of cost of collection by FIRS, Customs and DPR, the federal government received N120.4billion, representing 52.68 percent; states and N61 billion, representing 26.72 percent. The local governments, she said, received N47 billion, amounting to 20.60 percent of the amount distributed.

She announced that N13.7 billion, representing 13 percent derivation revenue, was also shared among the oil producing states. Adeosun said that the country generated N135.4 billion as mineral revenue and N144.3 billion as non-mineral revenue. She said this showed a decrease of N23.3 billion and N12 billion from what the country generated as mineral and non-mineral revenue in the months of August and September. She said that the balance in the Excess Crude Account remains 2.45 billion dollars.

According to John Inegbedion, chairman, commissioners of Finance Forum, the lower revenue generated for the month would put a strain on the finances of states and local government. “Something needs to be done to end the activities of the Niger-Delta militants because it is really impacting on the economy. We want to seek all support from all persons to help in bringing down the activities of these unscrupulous persons,” he said.

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