Between January and June 2023, the three levels of government – the Federal, States, and Local Government Councils (LGs) – split a total of N4.37 trillion from the Federation Account as statutory revenue allocations.
This is according to the latest report on Federation Account revenue allocations for the first half of the year by the Nigeria Extractive Industries Transparency Initiative (NEITI).
The overall distributable FAAC allocations to the three tiers of government in the first and second quarters (Q2) of 2023 were N2.32 trillion and N2.04 trillion, respectively, according to Dr. Orji Ogbonnanya Orji, Executive Secretary, NEITI, who announced the report on Thursday in Abuja.
According to the NEITI quarterly assessment, inflows into the Federation Account fell by 23% in Q2 2023, affecting distributable revenue, which fell by 12% when compared to total revenue dispensed in the first quarter.
“Over the six-month period, each tier of government received more than N1 trillion,” he stated.
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According to the report, a breakdown of revenue receipts revealed that the federal government collected almost N1.78 trillion, or 40.7 percent, while state governments received approximately N1.5 trillion, or 34.5 percent.
Local government councils received N1.08 trillion, or 24.8% of total distributable revenue for the period, according to the report.
It further revealed that a year-on-year comparison of total allocations in the comparable quarters of 2022 and 2023 revealed that the distributable revenue of N4.366 trillion shared was 16.7 percent greater than the N4.05 trillion shared in 2022.
As a result, the allocation received by the federal government during the review period grew by 19.8 percent to N1.78 trillion in 2023, up from N1.48 trillion in the similar period in 2022.
Similarly, allocations to state governments increased by around 11.2 percent to N1.42 trillion in 2023 from N1.26 trillion in 2022, while allocations to local governments increased by 16.8 percent to N1.08 trillion in 2023 from N926 billion in 2022.
The increase in half-yearly allocations in 2023 followed an increasing trend from the previous period, when distributable revenue for the first half of the year increased by 16.7 percent, from N3.47 trillion between January and June 2021 to N4.05 trillion in the same time in 2022.
In addition, federal, state, and local government allocations increased by 8.8 percent, 26.5 percent, and 14.2 percent, respectively.
However, the study stated that, when compared to the same period in 2022, FAAC distribution in Q2 decreased in absolute value, with total distributable revenue of N2.02 trillion being 13% less than the N2.16 trillion distributed in the second quarter of 2022.
According to the report, Delta state earned the largest allocation of N102.79 billion in the second quarter of 2023, followed by Akwa Ibom’s N70.01 billion, Rivers’ N69.73 billion, Lagos’ N60.64 billion, and Bayelsa’s N56.34 billion.
The overall disbursements to these five states (N359.5 billion), or 35.9 percent of total FAAC allocations, were greater than the total allocations to the following 15 states (N349.3 billion), according to the report.
It further stated that the cumulative allocation to the five states was greater than the share of allocation to the remaining 19 states combined, and that the bottom ten states earned 17.3 percent of the money divided in the second quarter of 2023.
Nasarawa, Ebonyi, Ekiti, Gombe, and Taraba received the lowest allocations of N16.71 billion, N16.84 billion, N16.95 billion, N17.22 billion, and N17.45 billion, respectively, according to the report.
It stated that, with the exception of Lagos, four of the five states with the highest allocations received a considerable share of the 13% derivation money assigned to oil-producing states.
It stated that the total disbursements to these five states (N359.5 billion), or 359.9% of total FAAC allocations, were greater than the total allocations to the next 15 states (N349.3 billion), and that the cumulative allocation to the five states was greater than the share of allocation to 19 other states.
It went on to say that the worst ten states received 17.3 percent of the revenue distributed in the second quarter of 2023.
It indicated that the majority of the federation account’s revenues came from remittances from the three major revenue-generating entities.
The Nigeria Upstream Petroleum Regulatory Commission, the Federal Inland Revenue Service (FIRS), and the Nigeria Customs Service (NCS) were among those named.
It indicated that these funds were generated through earnings from several revenue streams, such as oil and gas royalties, petroleum profit tax, corporation income tax, value added tax, and import and excise charges.
“Also, revenue remittances of about N1.84 trillion in Q2 2023 came from mineral and non-mineral sources, with mineral revenue (mostly oil and gas) accounting for N809 billion, or 44 percent, and non-mineral revenue accounting for N1.03 trillion, or 56 percent.”
The audit also highlighted a significant disparity in revenue distributions between the oil and gas and solid minerals industries, pointing out that this reflected the latter’s long-term underperformance.
“In terms of debt service obligations and the impacts on states’ net allocations, the report revealed that Lagos led the list of 36 states with a total deduction of N9.03 billion in the second quarter of 2023, followed by Delta (N6.76 billion), Ogun (N6.10 billion), Kaduna (N5.63 billion), Osun (N5.60 billion), and Imo (N5.51 billion.”
“N1.16 billion, N1.29 billion, N1.45 billion, N1.51 billion, and N1.88 billion were the lowest deductions in Jigawa, Anambra, Nassarawa, Kebbi, and Enugu States, respectively.”
“According to the report, the nine oil-producing states, namely Abia, Akwa Ibom, Anambra, Bayelsa, Delta, Edo, Imo, Ondo, and Rivers, received allocations relative to their share of the oil and gas as well as other minerals extracted from their domains,” it stated.
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It predicted that with effective, careful management and the use of N3.6 trillion in savings from subsidy payments in the first six months of 2023, Nigeria’s balance of payments would improve as demand, which was totally met by product imports, would be reduced.
It stated that the drop in demand would inadvertently result in a comparable fall in the dollar volume required to pay for premium motor spirit (PMS), which was the largest single import commodity by value.
The study applauded, with high hopes, the recent unification and floating of the exchange rate policy to build and stabilise the economy.
“With an average exchange rate of N713.69 to US$1, which is approximately 55% higher than the rate of N460.52 to the dollar recorded during Q2, the value of export earnings remitted to the Federation Account will increase by more than 50%.”
“Also, earnings from the new exchange rate through exports will increase the value of foreign capital inflows, including investments, loans, and grants,” the report advised.
The study also encouraged the Central Bank of Nigeria to focus policies to stable the currency rate in order to support effective implementation of the deregulation strategy and stabilise foreign exchange-dependent inflows into the Federation Account.
