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 stated in the latest report by the Nigeria Extractive Industries Transparency Initiative (NEITI) on Federation Account revenue allocations for the first half of the year.
Dr. Orji Ogbonnanya Orji, Executive Secretary, NEITI, who announced the findings on Thursday in Abuja, said total 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 the NEITI quarterly assessment, inflows into the Federation Account decreased by 23% in Q2 2023, affecting distributable revenue, which decreased by 12% when compared to total revenue dispensed in the first quarter.
“Over the course of six months, each tier of government received more than N1 trillion,” he stated.
According to the study, a breakdown of revenue receipts revealed that the federal government collected around N1.78 trillion, or 40.7 percent, while state governments received N1.5 trillion, or 34.5 percent.
According to the study, local government councils received N1.08 trillion, or 24.8% of total distributable revenue for the period.
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% greater than the N4.05 trillion shared in 2022.
As a result, the federal government’s allocation climbed by 19.8 percent to N1.78 trillion in 2023, up from N1.48 trillion in the same period in 2022.
Similarly, the research said that 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 was consistent with an upward trend from the preceding year, 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.
Additionally, federal, state, and local government allocations climbed by 8.8 percent, 26.5 percent, and 14.2 percent, respectively.
However, when compared to the same period in 2022, the study stated that 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.
Further examination of the payments to the states revealed that Delta 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.
It stated that 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).
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.
According to the study, 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.
It stated that four of the five states with the highest allocations, with the exception of Lagos, 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 35.9 percent of total FAAC allocations, were greater than the total allocations to the next 15 states (N349.3 billion), and 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 earned 17.3 percent of the revenue split in the second quarter of 2023.
It said that the majority of the revenues to the federation account came from remittances from the three major revenue-generating entities.
It named them the Nigeria Upstream Petroleum Regulatory Commission, the Federal Inland Revenue Service (FIRS), and the Nigeria Customs Service (NCS).
These funds, it explained, were generated by 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 N809 billion, or 44 percent, from mineral revenue (mostly oil and gas) and N1.03 trillion, or 56 percent, from non-mineral sources.”
The audit also highlighted a significant disparity between revenue disbursements from the oil and gas and solid minerals sectors, 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 topped 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.”
“Jigawa, Anambra, Nassarawa, Kebbi, and Enugu States had the lowest deductions of N1.16 billion, N1.29 billion, N1.45 billion, N1.51 billion, and N1.88 billion, respectively.”
According to the article, “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 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 importation, would be reduced.
“The drop in demand would inadvertently trigger a corresponding reduction in the dollar volume needed to pay for premium motor spirit (PMS), which constituted the largest single import product by value,” he said.
The study commended the recent unification and floating of the exchange rate policy to build and stable the economy with high hopes.
“The 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, will significantly increase the value of export earnings remitted to the Federation Account 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,” it advised.
The study also encouraged the Central Bank of Nigeria to focus policies to stable the currency rate in order to support the efficient execution of the deregulation strategy and stabilise foreign exchange-dependent inflows into the Federation Account.
