Poverty reigns in oil states despite two-fold FAAC boost

By Dipo Oladehinde, Faith Esifiho,  and Cynthia Egboboh

The economic fortunes of the Niger Delta, the hub of Nigeria’s oil sector, have not reflected the two-fold increase in allocations from the Federation Account Allocation Committee (FAAC).

Data sourced by BusinessDay showed FAAC shared a total sum of N2.07 trillion to the three tiers of government as federation allocation for February, 2024, a 112.016 percent increase compared to N976.34 billion distributed in the pre-subsidy era of May 2023.

Further breakdown showed the derivation fund, a revenue paid by FAAC from the 13 percent derivation fund to states that produce oil and other minerals increased by 86 percent to N85.10 billion in February 2024 from N45.6 billion in January 2024.

Read also: 15 states shed N118bn in debt as FAAC inflows rise

Despite the increased allocations, experts said the Niger Delta region remains a case study of what development experts call the ‘resource curse.’

“Nigeria’s oil wealth was insufficient to spark a Middle Eastern-style economic miracle in the Niger Delta back then. Now, with a population three times larger and decreasing investment, it is woefully inadequate,” Aisha Mohammed, an energy analyst at the Lagos-based Center for Development Studies said.

Mohammed noted that the area is tainted with environmental pollution, poverty, and a sense of neglect that has continued to plague it despite playing host to major international oil companies that have paid billions of dollars in taxes to the government of Nigeria and the region.

“The gusher of oil money also fuels the corruption and unrest that has long plagued the Niger Delta region,” she said.

New data released by Shell, the global energy giant, showed Nigeria regained its position as the biggest recipient of payments from Shell as production entitlement, royalties, taxes and fees to the government in 2023 amounted to $4.92 billion, the highest in four years.

The payout to Nigeria increased by 8.85 percent compared to the previous year, representing 16.67 percent of the company’s total payments to 26 countries, new data released by Shell showed.

“On the ground though, we also saw the negligible impact that this money is having on people’s lives and on environmental protection,” said a research report by a group of civil society organisations based in the United Kingdom called ‘Publish What You Pay’.

According to Tijah Bolton-Akpan, co-founder and director of Policy Alert, an NGO in Akwa Ibom State, quick and fast petrodollar funds are waning, and Nigeria’s oil-producing states will feel the pain.

The nine major oil-producing states of Nigeria include Delta, Akwa Ibom, Rivers, Bayelsa, Edo, Ondo, Imo, Abia and Anambra.

Read also: FAAC disbursement jump 101% to N2.07 trillion in one year

“While oil money continues to flow into the coffers of these states, paradoxically, most oil-producing communities remain poverty-stricken, plagued by unemployment, and are devoid of basic social amenities like potable water, hospitals, electricity, motorable roads, and conducive learning environment in their schools,” Tunde Osunlusi, an energy analyst in a Lagos-based investment bank said.

Available data showed derivation fund to oil-producing states stood at N75.4 billion in December 2023; N50.7 billion in November 2023; N85 billion in October 2023; N41.1 billion in September 2023; N56.5 billion in August 2023; N47.5 billion in July 2023; N41.9 billion in June 2023 and N45.6 billion in May 2023.

As contained in the communique issued to BusinessDay, from the amount disbursed by FAAC, which includes Gross Statutory Revenue, Value Added Tax (VAT), Electronic Money Transfer Levy (EMTL), and Exchange Difference (ED), the Federal Government received N345.890 billion, the States received N398.689 billion and the Local Government Councils got N288.688 billion.

The gross statutory revenue of N1.01 trillion received in the month was lower than the sum of N1.19 trillion received in February 2024 by N175.212 billion.

“From that amount, the sum of N46.934 billion was allocated for the cost of collection and a total sum of N659.049 billion for transfers, intervention and refunds.

“The remaining balance of N311.233 billion was distributed as follows to the three tiers of government: Federal Government got the sum of N133.960 billion, States received N67.946 billion, the sum of N52.384 billion was allocated to LGCs and N56.943 billion was given to Derivation Revenue (13% Mineral producing States).

The Communique also disclosed N285.525 billion from Exchange Difference, which was shared as follows: Federal Government received N132.935 billion, States got N67.426 billion, the sum of N51.983 billion was allocated to Local Government Councils, while N33.181 billion was given for Derivation (13 percent of mineral revenue).

Read also: Subsidy removal: Nasarawa, Enugu Anambra see highest increases in FAAC allocation

“The total revenue distributable for the current month of March 2024, was drawn from statutory revenue of N311.233 billion, VAT of N511.879 billion, N14.754 billion from Electronic Money Transfer Levy (EMTL), and N285.525 billion from Exchange Difference, bringing the total distributable amount for the month to N1.1 trillion.

“The balance in the Excess Crude Account (ECA) as at April 2024 stands at $473,754.57,” it stated.