Disbursement data from the Federation Account Allocation Committee (FAAC) between January and April 2020 has revealed the true state of Nigeria’s account in 2020. From the data sourced from the National Bureau of Statistics, total allocation declined by 9.63 percent between January and February. Between February and March, another 10.16 percent decline in total allocation was recorded. However, the total allocation appreciated by over 34 percent between March and April.
Revenue Sources
In the first four months of 2020, a total of ₦2.73 trillion was disbursed by the committee. Of this sum, ₦716 billion was disbursed in January, ₦647 billion was disbursed in February, ₦582 billion was disbursed in March, and ₦781 was disbursed in April. Most of these disbursements were funded from the statutory account.
In January, 83.8 percent of the disbursement was funded from the statutory account. Similarly, 81 percent and 80 percent of the disbursement in February and March, respectively, were sourced from the statutory account. In April, the disbursement from statutory account dropped to 61 percent of the total allocation. However, the statutory account still provided most of the disbursements in the four months.
Other funding sources for the disbursements were Value Added Tax (VAT), Exchange Gain Differences, Excess Bank Charges, Excess Oil Revenue, and Forex Equalization Account. After statutory transfer, most of the disbursement was sourced from Value Added Tax. Monthly contributions of other revenue sources to the disbursements are as shown in the table below.
|
Month |
Statutory Account(₦’bn) |
Excess Oil Revenue(₦’bn) |
VAT(₦’bn) |
Exchange Gain Differences(billion ₦’bn) |
Non–Oil Revenue(₦’bn) |
Excess Bank Charges(₦’bn) |
Forex EqualizationAccount (₦) |
|
January |
600.31 |
|
114.81 |
1.18 |
|
|
|
|
February |
524.59 |
|
104.76 |
1.04 |
16.3 |
654.08 |
|
|
March |
466.06 |
|
99.55bn |
0.758 |
|
|
15.2 bn |
|
April |
478.18 |
119.5 |
120.27 |
62.98 |
|
|
|
Share of Disbursement
The data has also shown the share of disbursement across the three tiers of government and other agencies of government. The following four major disbursement headings were identified: Federal Government, States, Local Government, and Derivation Fund to the Oil Producing States. Each of these recorded declines in allocation between January and March. Federal government allocation decreased by 7 percent in February. A further decrease of 11 percent below the figure for February was recorded in March. The figure increased by about 12 percent in April.
Similar decreases were reported in the total allocations to states, local governments, and other agencies of government between January and March. From a disbursement of ₦191.3 billion to states in January, a 7.5 percent decreased to ₦132 billion was recorded in February. Another 10 percent decrease in March preceded the 14 percent increase in state allocation in April. A similar trend was recorded for local governments and other agencies.
Implications for States
Across revenue sources, share disbursement, and total allocation, decreases were recorded from January to March 2020. Even with the peaks recorded in April, records indicate a considerable decline in allocation compared to last year. For instance, in the last two quarters of 2019, state allocations ranged from ₦198 billion to ₦219 billion. This implies that the least allocation to states between July and December 2019, the allocation was about ₦7.5 billion more than the most allocation to states between January and April 2019.
This trend raises questions on the sustainability of states across the country in the next couple of months. Already, a report on Internally Generated Revenues across states in Nigeria has shown that many states cannot survive without federal allocation. Only three states generated more IGR above federal allocation in 2019. The revenue instabilities have continued to persist. Based on the reality and the declining oil revenues, the Chairman of the Nigerian Governor’s Forum had hinted on the possibility of zero FAAC allocation from June.
Similarly, the National Economic Sustainability Committee recently announced the overbearing implication of the current economic crises. Through its newly developed sustainability plan, the committee stated that the ongoing crises will have serious implications for personnel costs, overheads and capital expenditures at Federal, State and Local Government levels. This crisis is also expected to adversely impact on employment and poverty.
Despite the approaching economic loom, there is still opacity on the coping measures of states. Little is known about how states intend to weather the crises and limit the impacts on the citizens. With the opacity in coping measures, there is a possibility of workers layoff and delays in payment of workers salaries. This will result in untold hardships for the citizens. It is thus important that the state governors provide the required leadership and design sustainability plan in line with the current realities.