The Federation Account Allocation Committee (FAAC) shared a total of N2.616 trillion among the three tiers of government in the first four months of 2020, figures compiled by THISDAY have shown.
The amount was four per cent higher than the total of N2.504 trillion shared among the federal, states and local governments in the first four months of 2019.
However, the amount of money shared among the three tiers of government is expected to drop significantly as Nigeria faces the challenge posed by the sharp decline in crude oil price as well as the economic damage caused by the COVID-19 pandemic.
Oil contributes 90 per cent of the country’s exports, 30 per cent of banking sector credit and 50 per cent of fiscal revenues.
A breakdown of the total amount shared so far by FAAC this year, showed that while in January, N647 billion was distributed among the federal, states and local governments; in February they got N582 billion; N781 billion in March and N606 billion in April.
The Chief Executive Officer of Financial Derivatives Company Limited and a member of President Muhammadu Buhari’s Economic Advisory Council, Mr. Bismarck Rewane, recently predicted that Nigeria’s oil revenue was likely to decline by between 70 per cent and 80 per cent this year, representing between $15 billion and $17 billion fiscal gaps.
The country recorded crude oil and gas export sales revenue of $434.85 million in January, the Nigerian National Petroleum Corporation (NNPC) said recently.
According to Rewane, the country’s other domestic revenue sources have also been negatively affected by COVID-19, adding that government revenues have been under intense pressure.
“The federal government is struggling with the reduction and elimination of subsidies without sparking social unrest. Tax collection, mobilisation and prudent management of tax revenues will be topmost priorities.
“Total external debt has risen to $31 billion and will climb further with more lending from multi-laterals to $36 billion. Debt service burden is already in excess of 96 per cent of independent revenues and terms of trade to deteriorate sharply in 2020,” he added.
He explained that export prices have been down by 60 per cent; import prices by 15 per cent while oil export volume was estimated to fall to 1.3 million barrels per day.
He added that the country’s buffers remain low with high vulnerabilities.
“Oil dependent economies like Nigeria and Angola will be badly hit by the twin shocks of COVID-19 and dwindling oil prices,” he stated.
The Director-General, West African Institute of Financial and Economic Management (WAIFEM), Dr. Baba Musa, also stressed the need to diversify the country’s revenue base.
He noted that over the years, the mantra has been to diversify the economy, but despite that, there has been a heavy reliance on oil as a major source of revenue.
“But if you look at most of the developed economies, most of them are driven by the taxes they collect. So, in our tax system, there is still a lot of room for improvement. Nigeria’s tax to Gross Domestic Product (GDP) is far below Africa and even West African average.
“So, what is required is that now all those loopholes in terms of revenue collection, we need to block them,” he added.
The Founder, Foundation for Economic Research, Prof. Akpan Ekpo, also urged the federal government to always prepare what he termed a non-oil budget, in order to be able to avoid external shocks.
“What I have been saying for years is that anytime we have high crude oil price, we should always see it as a windfall, save a lot of the revenue and target it for spending on infrastructure. I worked with Anthony Ani when he was Minister of Finance and we planned to do a non-oil budget.
“If you look at the Nigerian economy, oil contributes only 10 per cent to Gross Domestic Product (GDP), while the non-oil sector contributes 90 per cent. So, we can actually do a non-oil budget. If we had been doing it for years, we would have gotten used to it, so that if the oil price does well, it becomes like a windfall. Let us demystify the oil sector because oil may finish one day,” he had said.