NEITI: FAAC Allocation Not Enough to Fund States’ Budget

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Stories by Chineme Okafor in Abuja
The Nigeria Extractive Industries Transparency Initiative (NEITI) has declared that none of the 36 states were able to fund their respective annual budget in 2018 with the allocation they got from the Federation Accounts Allocation Committee (FAAC) last year.

Indicating that this was clearly a disturbing development, especially with regards to developments of the states, NEITI, explained that out of the 36 states, only three of them – Delta, Enugu and Yobe – received FAAC allocation which was more than 50 per cent of their budgets.
It stated this in its quarterly review of the FAAC disbursements which was obtained by THISDAY.

The report showed that between 2015 and 2018, the three tiers of government in Nigeria shared a total of N26.152 trillion. A breakdown of this showed that N6.11 trillion, N5.1 trillion, N6.418 trillion and N8.524 trillion were shared in 2015, 2016, 2017 and 2018 respectively.

According to NEITI, while FAAC disbursements to states increased considerably in recent years, the allocations were inadequate in servicing their budgets.
It explained that the figures it calculated showed a wide disparity between budgets and FAAC disbursements of the states, adding, “Clearly, there is no state that can adequately finance its budget solely from FAAC disbursements. This inability varies from state to state.”

It added that while internally generated revenue (IGR) contributed to revenue for all states, it was highly unlikely that IGR were able to make up for the shortfall in FAAC disbursements. The IGR figures, NEITI stated, were only available for the first half of the year.

“In order to facilitate the analysis, the half-year IGR figures were multiplied by two to give approximate full year IGR figures.
“The approximated IGR figures show that IGR was less than 50 per cent of FAAC disbursements for most of the states. There are four exceptions: Cross River, Lagos, Ogun and Rivers States. For these states, IGR was more than 50 per cent of FAAC disbursements,” it said in the quarterly review.
NEITI explained that it was only in Lagos and Ogun States that their IGRs were actually higher than FAAC disbursements, while the IGRs of six other states – Enugu; Kaduna; Kano; Kwara; Osun; and Oyo were more than 40 per cent of disbursements.

“For these ten states, there is a probability that actual IGR will be sufficient to augment FAAC disbursements to finance their budgets.
“For all the other states, it is highly unlikely that even with actual IGR, they will be able to finance their budgets. There are some extreme cases. There are eight states whose budgets were more than 200 per cent of their FAAC disbursements: Cross River; Ebonyi; Kwara; Lagos; Ogun; Osun; Oyo; and Sokoto.
“There is another group of ten states whose budgets were more than 150 per cent of their FAAC disbursements: Adamawa; Akwa Ibom; Anambra; Bauchi; Benue; Imo; Kaduna; Katsina; Plateau; and Zamfara,” it noted.

On FAAC disbursements between 2015 and 2018, the NEITI figures revealed that following the drastic drop in disbursements from 2015 to 2016, disbursements have consistently been rising from 2017. A summary of it showed that for the four-year period, N26.152 trillion was disbursed to the three tiers of government.
“Total disbursements fell by 30 per cent between 2014 (N8.595 trillion) and 2015 (N6.011 trillion). Subsequently, total disbursements fell by 15 per cent, from N6.011 trillion in 2015 to N5.100 trillion in 2016. From 2017, total disbursements started rising as evidenced by the 25 per cent increase from 2016 to 2017 (N6.418 trillion).

“Total disbursements in 2018 increased by 32 per cent over the 2017 figures. These increases in FAAC disbursements are a welcome development from the disturbing government revenue figures of 2015 to 2016 which resulted in severe economic hardship on the Nigerian populace, and reflected in the economic recession from the second quarter of 2016 to the first quarter of 2017,” the NEITI review stated.

It added, “The figure reveals that, with the exception of the third quarter of 2017, there has been a consistent rise in quarterly disbursements since the second quarter of 2017. The highest quarterly amount of N2.299 trillion disbursed in the fourth quarter of 2018 is the highest quarterly disbursement since the second quarter of 2014.

“There were three consecutive quarters in 2018 when total disbursements exceeded N2 trillion. The last time this happened was in the third quarter of 2014. The figures reveal particularly striking increases in 2018, compared to 2017. For the first quarter of 2018, total disbursements were N1.938 trillion, while total disbursements in the first quarter of 2017 were N1.411 trillion. This represents an increase of 37.3 per cent over the 2017 figures.”