The negative impact of falling global oil prices on the Nigerian economy is pushing states to adopt strategies that would enable them survive the difficult times.
Some of the key strategies being considered include the review of the remunerations of political office holders and increased attention on the development of the natural resource endowment potentials.
Crude oil price on Friday dropped to $43.14 per barrel, against the oil benchmark price of $65 per barrels proposed by the Federal Government in the 2015 Budget currently before the National Assembly for approval.
Since November 2014 when oil price dropped below the $79 per barrel benchmark contained in the 2014 budget, government unfolded a regime of austerity measures to cut cost and reduce expenditure in government ministries, departments and agencies, MDAs.
At the end of the Federation Accounts Allocation Committee, FAAC, meeting in Abuja on Friday, representatives of the 36 states and the Federal Capital Territory, FCT, bemoaned the impact of the falling oil prices at the international market on the economies, particularly with dwindling revenues from crude oil exports.
The Chairman of the Commissioners of Finance Forum, Timothy Odaah, told reporters at the end of the FAAC meeting that revenue accruals in the Federation Accounts available for sharing amount the three tiers of government has been dwindling since the beginning of the crisis in July.
According to Mr. Odaah, who is also the Ebonyi State Commissioner of Finance, revenue accruals in the federation account from oil and non-oil sources have been declining in recent times.
Oil revenue, which stood at about N383.147 billion in November, declined marginally to N381.58 billion in December 2014, while non-oil revenue for the same period also declined from N115.162 billion to N107.8billion.
These were against revenue targets proposed in the 2014 budget for the month of N417.612 billion (oil) and N165.323billion (non-oil).
To survive the difficult times, Mr. Odaah said states have been compelled to look inwards for ways to cut down on their expenditures, while saving monies from internal sources for development.
He said one of the key proposals being considered by most states is the need to review the remunerations and allowances of political office holders, which he said was exerting enormous pressures on most state government revenues.
“The issue is not about the number of these political appointees, but their huge earnings,” he said.
Besides, he said most states are also reviewing their revenue generation strategies to focus more attention on boosting their internally generated revenue, IGR, earnings.
Efforts are being made to ensure they paid a closer attention to the exploitation and development of the natural resources potentials in their various domains to boost their non-oil revenue earning
The Accountant General of the Federation, AGF, Jonah Otunla, attributed the dip in non-oil revenues partially to timelines for tax payment by companies, which was yet to fall due.
Total revenue, including transfer to the excess crude revenue account, ECA, which stood at N500.079 billion in November, also went down to N490.031 billion in December, 2014 as against N582.935billion proposed in the 2014 budget.
Transfer to ECA reduced from N1.767billion in November to N655million last month.
During the meeting, the AGF said the gross revenue of N490.031 billion for the month was lower by about N10.045 billion from the figure the previous month.
According to Mr. Otunla, a 12 per cent drop in crude oil price has resulted in a reduction in the country’s revenue earnings from $87.8million in October 2014 to $77.5 million in November.
The development, he noted, was responsible for the loss of $62.8million in oil revenue and a 52 per cent loss in crude oil export volume.
Besides, he said another 31 per cent price decline culminated in a total revenue loss from liquefied petroleum gas, LPG and natural gas liquids, NGL exports for the period.
“October sales all contributed negatively to the Federation equity,” the AGF said.
He said the persistent declaration of Force Majeure by Shell Petroleum Development Company, SPDC since June 2014, production shutdowns and shut-ins of trunk and pipelines at the various export terminals also negatively impacted revenue performance.
He gave total statutory distributable revenue for December 2014 as N474.4billion, which was higher than the amount distributed in November by N46.746 billion, while N6.33bilion was refunded by the
Nigerian National Petroleum Corporation, NNPC.
Another N10.551billion was realized as exchange gain, in addition to withdrawal of N15.631billion from the ECA for distribution, bringing total distributable revenue for the month, including value added tax, VAT of N73.466billion, to N580.378billion.