The Nigeria Extractive Industries Transparency Initiative,( NEITI) has cautioned the three tiers of government on the need to exercise some restraint in their expenditure profiles and continuous dependence on oil revenues to fund budgets saying persistence in such habits given its volatility was largely unsustainable and would continue to make planning and budgeting difficult.
It disclosed that Federation Account Allocation Committee, FAAC, disbursements to the Federal Government, states and local governments in the country depreciated by 0.45 per cent to N1.929 trillion between January and March 2019, from N1.938 trillion recorded in the same period in 2018.
NEITI noted that as a result of the dip in crude oil prices, total FAAC disbursements in the first quarter of 2019 ended the recent trend of over N2 trillion disbursements which lasted for three consecutive quarters of second quarter to fourth quarter of 2018.
Acting Executive Secretary of NEITI, Mr. Waziri Adio, NEITI, in a statement on its Quarterly Review of total FAAC disbursements in first quarter 2019, however, noted that the amount disbursed by FAAC in the period under review represented an improvement of 36.7 per cent compared with the N1.411 trillion recorded in the first quarter of 2017.
NEITI attributed the reduction in FAAC disbursements to drop in oil prices, noting that the prices of the commodity had started its downward spiral from November 2018.
It added that from the disbursements, the Federal Government received N803.18 billion in the first quarters of this year, 1.18 per cent lower than the N812.8 billion the Federal Government received in the same period in 2018 and 46.2 per cent higher than the N549.1 billion disbursed in the corresponding quarters of 2017.
It said, “Oil prices were above $80 per barrel in October 2018 but by December 2018, they had dropped to $57 per barrel. Average oil price for the first quarter of 2019 was $63.17 per barrel. Average oil price for year 2018 was $71.06 per barrel. Thus, oil prices have been considerably lower in the first three months of 2019 than they were in 2018,” NEITI stated.
Giving a breakdown of the disbursements, NEITI revealed that the 36 states shared N675.2 billion in the first quarter of 2019, representing 1.19 per cent decline on the N683.4 billion disbursed to the states in first quarter 2018 but 48 per cent higher than the N456 billion disbursed in first quarter 2017.
It added that only the N398.44 billion disbursed to local governments in first quarter 2019 was higher by 1.28 per cent when compared to N393.4 billion disbursed in the first quarter of 2018, and 47.8 pet cent higher than the amount disbursed to them in first quarter 2017.
NEITI also observed that this year’s budgets as already presented by 35 states cannot be adequately funded even by combined net FAAC disbursements to each state in 2017 and 2018. It added that 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 the 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,” NEITI noted.
The transparency agency maintained that the gap in the ability of FAAC disbursements to finance state budgets has 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 further identified only three states, Lagos, Rivers and Ogun states, as positive examples in IGR. NEITI identified Yobe as the only state that can fund its 2019 budgets from combined FAAC allocations for 2017 and 2018. It listed eight states, 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, observed that these eight states are just in slightly better position than others in terms of capacity to fund their budgets.
On the share of the FAAC disbursements by each of the 36 States, NEITI, in its Quarterly Review observed wide disparities, noting for instance that Delta state received the highest allocation of N55.19 billion, while Osun state received N5.11 billion, indicating 980 per cent difference.