Fiscal policy closely correlates with the character and dynamics of any federal arrangement. Resource disbursement is a fundamental fiscal issue in the practice of Nigeria federalism. The federal, states and local governments which constitute the three tiers of government in Nigeria are each given tax-raising powers. The responsibility of disbursing the funds accrued in the common pool account is the perquisite of the federal government.
“The Revenue Allocation Act provides for the distribution of federation funds. Section 1 of the Act provides that, “the amount standing to the credit of the Federation Account, less the sum equivalent to 13 per cent of the revenue accruing to the Federation Account directly from any natural resources as a first-line charge for distribution to the beneficiaries of the derivation funds in accordance with the Constitution is distributed among the Federal and State Governments and the Local Government Councils in each State of the Federation”, Nigeria Extractive Industries Transparency Initiative, stated in one of its documents.
Under the current sharing formula, the federal government takes the major stake of 52.68 per cent from the federation account. And the 36 states with 774 local governments are left with 26.72 per cent and 20.72 per cent respectively.
Findings by BusinessDay Research and Intelligence Unit (BRIU) reveals that a total of N629.12billion was distributed as Federal Allocation for the month of January 2020 by the Federal Account Allocation Committee (FAAC) among the federal, state and local governments.
This represents N87.17 billion or 12 per cent decrease against N716.29 billion disbursed in December 2019. The allocation for the said period comprised revenue from the Value Added Tax (VAT), exchange gain and the statutory revenue.
There has been a noticeable fluctuation in revenue allocation. The recent declined in revenue could be attributed to the recent development in the global oil market. On February 6, crude oil price for OPEC basket closed at $55.72 per barrel, should the price remain constant and accompanied with the market uncertainty, allocations to the federal, state and local governments will decline further. This is not good for the 2020 appropriation bill.
For the 2019 fiscal year, the three tiers of government received a total allocation of N8.2 trillion. A breakdown of the distribution reveals that the federal, state and local government received N287.929 billion, N192.302 billion and N143.698 billion respectively for December 2019.
Source: NBS, BRIU
Allocation of revenue for the second half of 2019
A communique issued by the Federation Account Allocation Committee (FAAC) specified that from the total revenue of N716.298 billion generated in December 2019, the federal government received N287.929 billion, the state governments received N191.302 billion, and the local government councils received N143.698 billion.
The gross statutory revenue for the period was about N601 billion. This was higher than the N492 billion received in the previous month by N108 billon. The gross revenue available from VAT was N114.8 billion as against N90.2 billion distributed in the previous month, an increase of N24.6 billion.
For the month of November 2019, a total of N702.02 billion was disbursed to the three tiers of government from revenue generated in October 2019. According to the National Bureau of Statistic (NBS) report
The Federal Government received a total of N295.74billion from the N702.02billion. States received a total of N192.70billion and local governments received N144.99billion. The sum of N49.16billion was shared among the oil-producing states as their 13 per cent derivation fund.
Revenue generating agencies such as the Nigeria Customs Service (NCS), Federal Inland Revenue Service (FIRS) and Department of Petroleum Resources (DPR) received N5.97billion, N9.12billion and N4.34billion respectively as cost of revenue collections.
Further, breakdown of revenue allocation distribution to the Federal Government of Nigeria (FGN) revealed that the sum of N228.02billion was disbursed to the FGN consolidated revenue account; N5.33billion shared as a share of derivation and ecology; N2.66billion as stabilization fund; N8.95billion for the development of natural resources; and N6.30billion to FCT Abuja.
Similarly, the Federal Government received a total of N293.80 billion from the N693.52 billion. States received a total of N186.81 billion and local governments received N140.86 billion. The sum of N51.53billion was shared among the oil-producing states as 13 per cent derivation fund from October 2019 revenue.
Further breakdown of October FAAC disbursement reveals that the sum of N226.21 billion was disbursed to the FGN consolidated revenue account; N5.32 billion shared as a share of derivation and ecology; N2.66billion as stabilization fund; N8.94billion for the development of natural resources; and N6.17billion to the Federal Capital Territory (FCT) Abuja.
In September 2019, a total of N740.87billion was disbursed to the three tiers of government from revenue generated in August 2019.
The amount expended consist of N610. 04billion from the Statutory Account, N20billion from Forex Equalisation Account, N1.754billion from Excess Bank Charges Recovered for the Month, N88.08billion from VAT and N1billion exchange gain differences.
Federal Government received a total of N310.97billion from the N740.87billion. States received a total of N193.57 billion and Local governments received N146.23billion. The sum of N48.74billion was shared among the oil-producing states as 13 per cent derivation fund.
For the month of August, a total N769.53billion was disbursed from the revenue generated in the month of July – federal, state and local government received N299.80billion, N190.38 billion and N143.57billion, while the sum of N51.63 billion was shared among the oil-producing states as part of the 13 per cent derivative fund.
The amount disbursed encompassed of N607.37 billion from the Statutory Account, N94.16billion from VAT and N999.99 million exchange gain differences. In addition, revenue-generating agencies such as – NCL, FIRS and DPR received a total of N21.86 billion which gets N5.70billion N11.14 billion and N5.02 billion respectively as cost of revenue collection.
For the month of July, a total N762.6billion was disbursed from the revenue generated in the month of July – federal, state and local government received N309.43billion, N201.16billion and N151.38 billion, while the sum of N38.70 billion was shared among the oil-producing states as part of the 13 per cent derivative fund.
The federal government spent a total of N22.92 as cost of revenue collection to NCS, FIRS and DPR for the month of July, each of the agencies gets N4.90billion, N13.92billion and N4.10billion respectively.
Further findings show that the sum of N250.71billion was disbursed to the FGN consolidated revenue account; N5.58 billion shared as a share of derivation and ecology; N2.79billion as stabilization fund; N9.37 billion for the development of natural resources; and N6.58 billion to the Federal Capital Territory (FCT) Abuja. Approximately N4.4 trillion was allocated to Federal, State and Local government for the second half of 2019.