The combined net disbursements from the Federation Allocation Account Committee (FAAC) to the 36 states and the Federal Capital Territory, Abuja, in 2017 and 2018, can hardly fund the 2019 budgets of 35 states, the latest report by the Nigerian Extractive Industries Transparency Initiative (NEITI) has shown.
Also, NEITI said total FAAC disbursement to the states and Abuja between January and March this year dropped significantly as a result of declining global oil prices, slightly affecting government earnings.
The latest report by the NEITI said total disbursements by FAAC to the states in the first quarter of this year stood at about N1.929 trillion.
The transparency agency said in the latest edition of its Quarterly Review publication that the figure showed a 0.45 per cent decline from the N1.938 trillion disbursed for the same period in 2018.
The publication said the disbursement for the quarter was however about 36.7 per cent higher than the N1.411trillion disbursed in the corresponding period in 2017.
NEITI said total FAAC disbursements in the first quarter of 2019 ended the recent trend of over N2 trillion disbursements which lasted for three consecutive quarters between the second and fourth quarter of 2018.
Details of the disbursements showed the federal government received a total N803.18 billion in the first quarter of this year, which was about 1.18 per cent lower than the N812.8 billion received in the same period in 2018. The figure was about 46.2 per cent higher than the N549.1 billion disbursed in the corresponding quarters of 2017.
The 36 states shared about N675.2 billion in the first quarter of this year, representing 1.19 per cent decline, from about N683.4 billion disbursed to the states in the first quarter of 2018, but 48 per cent higher than the N456 billion disbursed in the corresponding period in 2017.
From the review, NEITI said only the N398.44 billion disbursed to local governments in the first quarter of 2019 was higher by 1.28 per cent compared to about N393.4 billion disbursed in the first quarter of 2018, which is about 47.8 per cent higher than the disbursement in the same period in 2017.
The NEITI review attributed the reduction in FAAC disbursements to the drop in global crude oil prices during the period.
“Crude oil prices experienced a downward spiral from November 2018, from above $80 per barrel in October 2018, to about $57 per barrel by December 2018.
“Average oil price for the first quarter of 2019 was $63.17 per barrel, against the corresponding price of $71.06 per barrel for 2018.
“Thus, oil prices have been considerably lower in the first three months of 2019 than they were in 2018,” the Review said.
According to report, the combined net FAAC disbursements in 2017 and 2018 to each of the 36 states will be inadequate to fund the budgets by 35 states which have already been presented this year.
In addition, the NEITI Review said total state revenues (FAAC and Internally Generated Revenue) in 2017 and 2018 cannot fund 2019 budgets of 28 states.
“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 per cent (Cross River) and 43.1 per cent (Yobe).
Also, net disbursements to states in 2018 as a percentage of 2019 budgets ranged between 3.54 per cent (Cross River) and 57.7 per cent (Yobe).
Thus, clearly, no state can finance its 2019 budgets solely based on FAAC disbursements,” the report said.
The report said the gap in the capacity of FAAC disbursements to finance state budgets 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 identified only three states – Lagos, Rivers and Ogun – as positive examples in IGR performance.
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, noted that these eight states were just slightly better 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 noted wide disparities. For instance, Delta state received the highest allocation of N55.19 billion, while Osun state received N5.11 billion, indicating 980 per cent difference.
Another significant finding in the NEITI publication is how huge sums were being deducted directly from FAAC allocations of some states to service their debt obligations.
For instance, about N7.27 billion was directly deducted from Osun state allocations while Cross River State has 53 per cent deductions from its allocations.
NEITI therefore cautioned the three tiers of government to exercise some restraint in their expenditure profiles and continuous dependence on oil revenues to fund budgets.
Also, the publication warned that dependence on oil exports given its volatility is largely unsustainable and will continue to make planning and budgeting difficult.
Table: 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 (%)|