The three tiers of government- the federal, state and local governments shared the total sum of ₦10.1tn from the Federation Account as statutory revenue allocations in 2023.
Contained in the latest report by the Nigeria Extractive Industries Transparency Initiative (NEITI) on the Federation Account revenue allocations for the year 2023, the Executive Secretary of NEITI, Dr Orji Ogbonnaya, who announced the release of the report at the NEITI House in Abuja, said a breakdown of the revenue receipts showed that the Federal Government received about ₦4trn, representing about 39 per cent of the total allocation.
The 36 states got about ₦3.6trn representing 35 per cent while the 774 local government councils of the federation shared ₦2.6trn equivalent to 25 per cent.
Further analysis of the ₦10.143tn disbursements in 2023, showed an increase of about ₦2trn or 23 per cent when compared to the disbursement of ₦8.2trn shared in the corresponding year 2022.
The Review attributed the increase to improved revenue remittances to the federation account due to the removal of the petrol subsidy, and the floating of the exchange rate by the new administration.
The report highlighted that, while total revenues distributed from the federation account recorded an overall increase of 23 per cent in 2023, the increase accruing to each tier of government varied, largely due to the type of revenue streams contributing to the inflows into the federation account.
The NEITI Quarterly Review of 2023 FAAC allocations disclosed that the federal, state and local governments cumulatively received ₦1.9trin more than the amount shared in 2022. The first quarter of 2023 increased by about ₦580bn (33 per cent) when compared to the first quarter of 2022. The second quarter increased by about 10 per cent, third quarter by 27 per cent, and the fourth quarter had an increase of 23 per cent respectively.
The federal government’s share increased by about ₦574bn (17 per cent) from the ₦3.4trn it received in 2022 to about ₦4trn in 2023.
State governments shared ₦3.6trn in 2023 compared to the ₦2.8trn they got in 2022, showing an increase of about 30 per cent.
Similarly, local government councils’ share of federation allocation was about ₦3trn in 2023 compared to ₦2trn in 2023 which amounts to a 26 per cent increase.
While total distributed revenue from the federation account recorded an overall increase of about 24 per cent in 2023, the increase accruing to each tier of government varied, largely due to the type of revenue item contributing to the inflows into the account. In the same period (2023), states and local governments recorded increases in their allocations of 30 per cent and 26 per cent respectively. The increase in allocation to the federal government however was about 17 per cent.
State-by-state share of the allocations showed that Delta State received the largest share of ₦402bn (gross). The figure is inclusive of the state’s share of oil and gas derivation revenue.
Delta was followed by Rivers State which received ₦398bn. Akwa-Ibom State received the third largest allocation of ₦293bn. Nasarawa State received the least amount of ₦73bn, while Ebonyi and Ekiti states received ₦74.3bn and ₦74bn respectively.
According to Orji, the agency embarked on the NEITI FAAC quarterly review to enhance public understanding of federation account allocations, and disbursements as published by the government.
He explained that “The ultimate objective of this disclosure is to strengthen knowledge, awareness and promote public accountability of all institutions in public finance management”.
The review observed that the first five states that topped the allocation during the period under review are amongst the major oil-producing states in the country.
On the share of 13 per cent derivation revenue, nine states received the 13 per cent allocated to mineral-producing states from the proceeds from mineral revenue.
The derivation revenue remains a significant portion of revenue for states like Delta, Akwa Ibom, Anambra and Rivers states. Also, the derivation revenues of states such as Delta, Akwa Ibom, and Bayelsa, which were about 161 per cent, 141 per cent and about 128 per cent respectively, eclipsed their statutory revenues. Rivers State‘s derivation revenue was about 74 per cent during the period.
Notably, the other five oil-producing states recorded lesser derivation revenue compared to the four above. For example, Ondo State had about 28 per cent, Edo had 30 per cent, while Abia, Anambra and Imo recorded a derivation revenue of about 20 per cent or less.
The NEITI report noted that solid minerals producing states did not receive derivation revenues during the last quarter of last year, because of the need to allow the revenues to accumulate over a while before sharing can occur.
On direct deductions from the state, Delta State recorded by far the largest debt deductions in 2023. With a total deduction of about ₦13bn, Delta’s debt deduction was more than the deductions for Bauchi State, the second largest in 2023 by ₦282m, Lagos State recorded the least cumulative debt deductions amounting to ₦370m.
The report maintained that the reduced debt burden is attributable more to the increase in the size of federation account allocations than a reduction in the size of debt. The stark similarity in the debt size and sustainability charts indicated that states’ borrowing decisions are being determined by the size of their federation account allocations, and expected future earnings. While this pattern indicated good fiscal decisions by the states, it may also cause states to increase their current borrowing as revenues from the federation account allocations are beginning to increase.
Other key findings of the report showed that revenue remittances to the account fluctuated significantly every month due to corresponding fluctuations in oil and gas revenue. Oil and gas revenues reflected crude oil prices and Nigeria’s output which in turn is significantly affected by crude oil theft and acts of sabotage.
The Report pointed out that the main sources of revenue inflows to the account in 2023 were the Nigeria Upstream Petroleum Regulatory Commission (NUPRC), Federal Inland Revenue Service (FIRS) and Nigeria Customs Service (NCS), through earnings from the different revenue stream. This included oil, gas royalties, petroleum profit tax, company income tax, value-added tax, and import and excise duties.
The report also revealed that revenue from the solid minerals sector is very negligible, and reflected the under-performance of the sector.
The NEITI Review proffered key recommendations for enhanced performance of the federation account, including that; government (the National Assembly and the Executive), should adopt more conservative estimates for crude oil prices and output to enhance budgetary performance, reduce budget deficits and borrowing, and strengthen fiscal stabilisation.
NEITI renewed its earlier recommendations for the federal government to highly prioritise the ongoing efforts at economic diversification, and investment to improve power generation to encourage small, medium and large businesses to promote local production and reduce import and dependence on oil revenues.
The reviews also underlined the need for states, to join hands with the federal government to deal with insecurity in rural communities where agro-based businesses thrive, and pay attention to internally generated revenues through innovations and leadership that are citizen-centered.
