FAAC Shared N1.945tr to FG, States, LGS in Q1 2020

The Federation Accounts Allocation Committee (FAAC) disbursed N1.95 trillion to the Federal, States, Local government areas  and other statutory agencies in the first quarter of 2020.

A breakdown of the disbursements shows that N791.4 billion went to the Federal Government, N669 billion was shared by the states and about N395 billion was shared by the 774 local government areas. The balance went to the North East Development Commission, the Excess Crude Account, Federal Inland Revenue Service (FIRS), Nigeria Custom Service (NCS) and the Department of Petroleum Resources.
These  information and data are contained in the latest edition of the Quarterly Review by Nigeria Extractive Industries Transparency Initiative (NEITI) released in Abuja  Monday.
The NEITI report also notes that the Q1 2020 FAAC disbursements are the highest first quarter disbursements since 2014. “Total disbursements were N1.648 trillion in Q1 2015, N1.132 trillion in Q1 2016, N1.411 trillion in Q1 2017, N1.938 trillion in Q1 2018, and N1.929 trillion in Q1 2019,” the publication stated.
The review examined FAAC disbursements in the first quarter of this year and made projections on the possible impacts of COVID-19 on government revenues. “While total disbursements in Q1 2020 were slightly higher than Q1 2019 and Q1 2018, disbursements to the three tiers of government in Q1 2020 were slightly lower than Q1 2019 and Q1 2018. This is due to transfers to other accounts in Q1 2020 which were not done in either Q1 2019 or Q1 2018. These include allocations to the North East Development Commission and transfer to Excess Crude Account,” the review stated.
The NEITI Quarterly Review explained that total FAAC allocations during the period under review comprised of gross disbursements to the Federal Government, States, Local Government Councils and the 13% Derivation. It also covered cost of collections by the Nigerian Customs Service, the Federal Inland Revenue Service, the Department of Petroleum Resources and other allied handling charges.

NEITI noted that from the previous years, with the exception of 2018, the general trend since 2015 had been that total disbursements fell in the second quarters, before rising in the third quarters. It also noted that with the COVID-19- pandemic, it is almost certain that total disbursements will fall in the second quarter of 2020.

On FAAC disbursements to states between January and March this year, there was a wide disparity between states as Osun State with the lowest allocation received N6.44 billion and Delta State with the highest disbursement received N52.03, a difference of 708%.

The review also disclosed that Delta State’s net FAAC disbursements were higher than the combined total net disbursements of N50.67 billion of the six lowest receiving states, comprising Osun, Cross River, Plateau, Ogun, Ekiti and Gombe. Further analysis revealed that combined disbursements to four states (Delta, Akwa Ibom, Rivers and Bayelsa) with the highest net FAAC disbursements were higher than the combined net disbursements for the 17 states with the lowest disbursements.

“The combined total net disbursement to these four states was N167.76 billion. This figure is higher than the combined total of N159.99 billion received by the 17 lowest receiving states (Osun, Cross River, Plateau, Ogun, Ekiti, Gombe, Zamfara, Kwara, Nassarawa, Ebonyi, Taraba, Benue, Adamawa, Bauchi, Abia, and Kogi)”, the review stated.
According to the NEITI Quarterly Review, 31 states received less than N20 billion as total net FAAC disbursements in the first quarter of this year while only five states received more than N20 billion. The States are Lagos (N26.23 billion), Bayelsa (N35.14 billion), Rivers (N39.99 billion), Akwa Ibom (N40.61 billion), and Delta (N52.03 billion) respectively.
Furthermore, the  review  disclosed  wide disparity in the amounts deducted from the states as their debt obligations. For instance, Lagos State had the highest deductions of N14.92 billion, while Yobe State had the lowest deductions of N820.18 million.
On prospects of FAAC disbursements for the rest of the year as a result of the impact of COVID-19, the review remarked:  “In light of the ‘double whammy’ of declining oil demand and oil prices as a result of the COVID-19 pandemic, government revenue would likely continue to fall in subsequent months. As global crude oil prices plummet in the midst of the global oil supply glut arising from lockdown of economic activities in many countries of the world, all tiers of government will struggle to fund their 2020 budgets.”

According to the review, the projected revenue for the Federal Government for the year stands at N8.42 trillion, comprising oil revenue of N2.64 trillion, non-oil revenue of N1.81 trillion, and revenue from other sources of N3.97 trillion. Oil revenue remained the dominant single source of revenue, with the figure of N2.64 trillion making up 31.35% of total projected revenue.

“The interesting point to note is that while the share of oil revenue represents the direct revenue, there are also indirect sources of revenue from oil. These include signature bonus and renewals and share of dividend from NLNG. In addition, taxes and customs duties, which are based on economic activities will suffer in the light of the lockdown of the major activity hubs of the country”, the review stated.

The NEITI Quarterly  Review called for innovative and concerted actions on the part of governments at all levels to mitigate the impact of COVID-19, not just on revenues but also on the economy as a whole.
It welcomed the proactive measures already been taken by the Federal Government in this direction. These include the approval to withdraw $150 million from the Stabilization Fund to supplement  FAAC disbursements ; initiating  modalities for states to benefit from debt and interest moratorium, the review of this year’s budget to reflect current economic realities and a $3.4 billion facility by the International Monetary Fund (IMF).

While applauding these proactive interventions by the Federal Government, the publication urged state governments to emulate FG’s initiatives by making necessary adjustments in their revenue and expenditure plans for the year.
“Following the lead of the FG, state governments will also need to revise their budgets and prepare for lower FAAC disbursements. The states might need to rely more on internally generated revenue (IGR) to service their budgets. However, it must be said that IGR depends largely on personal incomes, which will likely fall as the lockdown is prolonged and economic opportunities become scarce” the report stated.
The NEITI Quarterly Review also drew the attention of the states to the negative impact of the COVID-19 pandemic on the structure of the expenditure of the states. According to the report, “More resources will have to be channeled to the health sector to combat the pandemic. This will result in movement of funds from other sectors hitherto identified as critical in their budgets”.