Federal, states, LGs share N4.37trn FAAC allocations Jan-June 2023 – NEITI

Between January and June 2023, the Federal, States, and Local Government Councils (LGs) divided N4.37 trillion in statutory revenue allocations from the Federation Account.

The most recent report from the Nigeria Extractive Industries Transparency Initiative (NEITI) on the allocations of revenue to the Federation Account for the first half of the year contains this information.

The report was released on Thursday in Abuja by Dr. Orji Ogbonnanya Orji, Executive Secretary of NEITI. He stated that the total distributable FAAC allocations to the three levels of government in the first and second quarters (Q2) of 2023 were N2.32 trillion and N2.04 trillion, respectively.

According to the NEITI quarterly assessment, inflows into the Federation Account fell by 23% in Q2 2023, which had an impact on the distributable revenue, which fell by 12% in comparison to the total revenue distributed in the first quarter.

Over the course of the six-month period, “each tier of government received more than N1 trillion,” he claimed.

According to the study, a breakdown of the revenue receipts revealed that the State governments collected N1.5 trillion, or 34.5%, while the federal government received approximately N1.78 trillion, or 40.7%.

The study states that N1.08 trillion, or 24.8% of the total distributable revenue for the time period, was given to local government councils.

It also stated that a comparison of the total allocations between the corresponding quarters in 2022 and 2023 revealed a 16.7% increase in distributable revenue, from around N4.05 trillion shared in 2022 to N4.366 trillion shared in 2023.

As a result, it was discovered that the federal government’s allocation for the time under review increased by 19.8% to N1.78 trillion in 2023 from N1.48 trillion during the same period in 2022.

Similarly, the research said that allocations to the LGs increased by 16.8% to N1.08 trillion in 2023 from N926 billion in 2022, while allocations to the State governments increased by around 11.2% to N1.42 trillion from N1.26 trillion in 2022.

The increase in half-yearly allocations in 2023 followed a positive rising trend from the preceding year, during which the distributable revenue for the first half of the year increased by 16.7%, from N3.47 trillion between January and June 2021 to N4.05 trillion in the same time the following year.

Additionally, allocations to the federal, states, and LGs all saw overall increases of 8.8%, 26.5%, and 14.2%, respectively.

However, it claimed that when compared to the same period in 2022, the study revealed a reduction in the absolute amount of FAAC distribution in Q2, with total distributable revenue of N2.02 trillion being 13% less than the approximately N2.16 trillion distributed in the second quarter of 2022.

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Further examination of the payments made to the states, according to the report, revealed that Delta state received the largest allocation in the second quarter of 2023, totaling N102.79 billion. Akwa Ibom came in second with N70.01 billion, followed by Rivers with N69.73 billion, Lagos with N60.64 billion, and Bayelsa with N56.34 billion.

It stated that the entire allocations to the following 15 states (N349.3 billion) were surpassed by the total disbursements to these five states (N359.5 billion), or 35.9% of the overall FAAC allocations.

The worst 10 states earned 17.3% of the money split in the second quarter of 2023, it was stated, adding that the total allocation to the five states was also greater than the share of distribution to the remaining 19 states combined.

States with the lowest allocations, totaling N16.71 billion, N16.84 billion, N16.95 billion, N17.22 billion, and N17.45 billion, respectively, were Nasarawa, Ebonyi, Ekiti, Gombe, and Taraba.

It stated that, with the exception of Lagos, four of the top five states in terms of allocations each received a sizable portion of the 13% derivation money allotted to oil-producing states.

It stated that the cumulative allocation to the five states was higher than the share of allocation to 19 other states, and that the total disbursements to these five states (N359.5 billion), or 35.9% of the total FAAC allocations, were higher than the total allocations to the following 15 states (N349.3 billion).

Additionally, it stated that 17.3% of the revenue distribution for the second quarter of 2023 went to the worst 10 states.
It was said that the three primary revenue-generating organisations sent the majority of their remittances to the federation account.

They were identified as the Federal Inland Revenue Service (FIRS), the Nigeria Customs Service (NCS), and the Nigeria Upstream Petroleum Regulatory Commission.

It was revealed that these funds came from a variety of sources, including oil and gas royalties, petroleum profit tax, corporate income tax, value added tax, import charges, and excise taxes.

Additionally, N1.84 trillion in revenue remittances in the second quarter of 2023 came from both mineral and non-mineral sources, with N809 billion, or 44%, coming from mineral revenue (mostly from oil and gas), and N1.03 trillion, or 56%, coming from non-mineral sources.

The research also highlighted a significant discrepancy between revenue disbursements from the oil and gas and solid minerals sectors, highlighting how this was a result of the latter’s ongoing underperformance over time.

With a total deduction of N9.03 billion in the second quarter of 2023, Lagos came out on top among the 36 states, followed by Delta (N6.76 billion), Ogun (N6.10 billion), Kaduna (N5.63 billion), Osun (N5.60 billion), and Imo (N5.51 billion). This is due to debt service obligations and their effects on the net allocations of the states.

“The lowest deductions, totaling N1.16 billion, N1.29 billion, N1.45 billion, N1.51 billion, and N1.88 billion, were made by Jigawa, Anambra, Nassarawa, Kebbi, and Enugu States.

According to the report, “the nine oil-producing states, namely Abia, Akwa Ibom, Anambra, Bayelsa, Delta, Edo, Imo, Ondo and Rivers states received allocations relative to their share of the oil and gas as well as other minerals extracted from their domains,” it stated.

According to the forecast, Nigeria’s balance of payments would improve with effective management, smart use of savings from subsidy payments, and increased demand that was totally met by product imports in the first half of 2023.

It stated that the decline in demand would unintentionally result in a comparable decrease in the amount of money required to pay for premium motor spirit (PMS), which was the most valuable import overall, he claimed.

The recent unification and floating of the exchange rate policies undertaken to strengthen and stabilise the economy were warmly welcomed by the report with great expectations.

“With the average exchange rate of N713.69 to $1, which is nearly a 55% increase over the rate of N460.52 to $1 recorded during Q2, the value of export profits sent to the Federation Account will be greatly increased by more than 50%.

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It advised that the value of foreign capital inflows, such as investments, loans, and grants, would increase as a result of earnings from the new exchange rate through exports.

The study also encouraged the Central Bank of Nigeria to emphasise measures to control the currency rate in order to support the efficient execution of the deregulation strategy and stable inflows into the Federation Account that depend on foreign exchange.