By Chineme Okafor
The Nigeria Extractive Industries Transparency Initiatives (NEITI) has projected that monies accruing to Nigeria’s federal purse for sharing between the federating units may pick up in the second half of 2020.
NEITI stated this in the latest edition of its quarterly review on the federation account. It explained that Nigeria has responded quickly to make adjustments in a number of areas to cope with the effects of the COVID-19 pandemic, and as such, the federation’s earnings could pick up.
It equally noted that gradual rise in oil prices could contribute to the rebound in earnings, adding that it expects a healthy earning for the country in the second half of 2020.
In the review, NEITI analysed disbursements from the federation account in the first half and second quarter of 2020. It explained total disbursements from the account in the first half of 2020 were N3.879 trillion; comprising of N1.53 trillion to the federal government, N1.29 trillion to state governments, and N771.34 billion to local governments.
It also stated that a total of N1.934 trillion was disbursed from the account in the second quarter of 2020; comprising N739.2 billion to the federal government, N629.3 billion to state governments, and N375.4 billion to local governments.
NEITI subsequently found that disbursements from the account in the first half of 2020 were volatile when compared to disbursements in similar periods in 2018 and 2019; and concluded that aggregate disbursements in the second quarter of 2020 marked the third consecutive month of falling disbursements.
It pointed out that part of measures taken by Nigeria against COVID-19 included the downward revision of its 2020 budget in anticipation of the expected reduction in revenue, amongst others.
“The oil price benchmark was reduced from $57 per barrel to $28 per barrel; oil production was reduced from 2.18 million barrels per day to 1.8 million barrels per day, and the exchange rate was initially adjusted from N305/$ to N360/$, and later to N380/$. These led to a revised budget of N10.81 trillion, to be financed with N5.835 trillion from revenue and N4.98 trillion from borrowing.
“In addition, N500 billion was added for COVID-19 related expenditure. Also, the government has approved and unveiled the N2.3 trillion Economic Sustainability Plan which is designed to address the various economic dimensions of the pandemic. Other policy measures included removal of fuel subsidies and full cost electricity tariffs to be completed by 2021.
“The FGN has taken a $3.4 billion emergency facility from the International Monetary Fund (IMF) and is withdrawing $150 million from the stabilisation fund of the Nigerian Sovereign Investment Authority (NSIA),” NEITI stated.
It further stated that the lockdown of economies as a result of COVID-19 resulted in slower rates of economic growth of countries across the world with Nigeria also affected.
“Nigeria’s GDP growth fell by 6.1 per cent in the second quarter of 2020 (GDP contracted by 20.4 per cent in the United Kingdom, 13.8 per cent in France, and 9.5 per cent in USA).
This contraction is hardly surprising. Lagos and Ogun States, and Abuja first went into lockdown on March 30.
“The gradual easing of the lockdowns started on May 4; at the same time with nationwide overnight curfews from 8pm to 6am. Also, Kano State was put under total lockdown on April 27.
“In addition, there was a nationwide closing of all schools, places of worship, and ban on gatherings. These measures constricted economic activities, which ultimately led to the contraction in economic growth,” the NEITI said.
In its projection, it stated that: “As the lockdown has been eased across the country, economic activities have started picking up. Available data from January to May 2020 reveal that actual government revenue was N1.62 trillion. This was 62 per cent of the expected pro-rata revenue of N2.62 trillion from the revised budget. Thus, there was a shortfall of 38 per cent in government revenue for the first five months of the year.
“As oil prices continue to rise, and with the increased pace of economic activities, it is projected that government revenue will perform better in the second half of 2020, albeit, with the possibility of shortfalls in revenue compared to budgeted figures.”