FAAC: A Nation on Perpetual Life Support
By Okey Nwachukwu
The media enjoys highlighting huge monetary figures, in whatever guise it may come or the purpose. For the typical Business Editor, seeing figures in multiple digits automatically elicits interest, and enhances the likelihood of being well placed. The headlines are particularly teasing when the numbers are derived from questionable or criminal activities.
Can you image such captions as ‘NNPC denies transferring N150 billion to Buhari’s in-law’s account at Access Bank’, ‘NCC fines telcos N900 billion for infractions in August’, ‘EFCC discovers N210 billion in ex-governor’s uncompleted building’, ‘Fisticuffs as FAAC shares N667 billion among FG and states in July’, ‘Nigeria loses $2 billion (N13trillion) to gas flaring in one year’, GTB posts N5 trillion as pretax profit in Q3, ‘Covid 19: Adenuga drops from world billionaires’ club,’ and Lagos state generates N3 trillion as IGR in October’.
Such is the power of monetary figures, which are sensationalized to meet public craving for outlandish figures and drama.
Over a long period of time, certain stats have become standard deliverables by the Nigerian media.
Amongst these include data on Nigeria’s inflationary trends, funds shared by the various tiers of government, the number of deaths caused by covid 19, number of ships expected at Nigeria’s seaports, amount spent on fuel subsidy, revenue generated by the Federal Inland Revenue Service and Nigeria Customs Service, the price of petrol, Nigeria’s burgeoning debt profile, the number of out-of-school children, surging poverty levels and unemployment rate, among others.
One of these activities is controlled by a body that many Nigerians, especially in the private sector, are ignorant about, but is taken seriously by the three tiers of government in the country. It is formatted as a monthly meeting attended by specific officials of states, local governments and the federal government where hundreds of billions of naira are distributed. It is called the Federation Account Allocation Committee (FAAC), consisting of the Commissioners of Finance and Accountant Generals of the 36 states, FCT, local governments and the Federal Government.
Specifically, FAAC is made up of the Federal Minister of Finance as chairman; the Commissioner for Finance of each State in the Federation; two persons to be appointed by the President; and the Accountant-General of the Federation. The Permanent Secretary of the Federal Ministry of Finance or such officer as may be designated by the Finance Minister shall be the Secretary to the Committee.
FAAC is one of several bodies specifically created to give expression to Nigeria’s federal structure. Another body, the Federal Character Commission (FCC), specifically ensures compliance with this political arrangement.
As it were, the mission of FAAC is simple: to agree on how much would be disbursed among the various levels of government for a given month. The funds to be shared are the totality of centrally-generated revenue, notably proceeds from crude oil sales and taxes. The monies are paid into the Federation Account domiciled at the Central Bank of Nigeria (CBN).
The working of FAAC is such that the component states and Federal Government make a case for what should be allocated to them based on certain metrics and the national revenue sharing formula. Under this formula, the Federal Government gets 52.68 per cent, the 36 states share 26.72 per cent, while the 774 local government areas share 20.60 per cent every month. A new revenue sharing formula is in the works.
So, every month, a crop of well-dressed public servants converge to share funds, like bank robbers sharing their loot. The committee’s sessions are keenly monitored from state capitals and Abuja for obvious reasons. Both the Federal Government and all the 36 states lack the capacity to independently generate funds with which to run their affairs, hence the free allocation offers an existential lifeline.
The meeting occasionally runs into a deadlock for one reason or another. The Federal Government, acting through the state oil behemoth, the Nigerian National Petroleum Company Limited (NNPC), often becomes the butt of accusation by states for attempts to shortchange them. They claim that the NNPC often unilaterally makes deductions from its revenue for other purposes before remitting funds to the FAAC for disbursement.
Instructively, majority of the states are plunged into recession once there is a delay or disagreement in disbursing the FAAC funds. Such delays result in stagnated payment of wages to workers, which in turn trigger endless labour unrests across the land.
The Nigeria Extractive Industries Transparency Initiative (NEITI) was emphatic in one of its reports that ‘no state in the country can finance its annual budget with its internally generated revenue and resources received from the Federation Accounts Allocation Committee (FAAC).’
The VAT, a major revenue source for the country, is currently at the centre of contention over its collection and control. Rivers and Lagos states, on one hand, and the FIRS, on the other, are in court over the tax.
The bigger challenge, over which public officials feign ignorance or are deliberately overlooking, is the gradual transition of the global economy to renewable energy. Most countries, on which Nigeria depends for substantial part of its oil exports, have begun setting targets for a total switch to green energy. Oil majors, who drill and market our petroleum, have set similar goals. Royal Dutch Shell, for example, one report said, has entered into talks with the Nigerian government to redirect its focus from onshore production to offshore operations due to oil theft, sabotage, and oil spillage. It has also begun offloading some of its operations in the country.
Other supermajors, TotalEnergies, BP, Chevron and ExxonMobil have reportedly reduced their operations in Nigeria as part of their plans to go green.
Oil sales have also been plummeting due to a variety of factors. “In May (2021), Nigeria’s oil output hit a record low following an average first-quarter output of just over 1.4 million barrels per day, which caused oil revenues to slump by 98 percent in April. This low output is owing partly to OPEC+ cuts at the beginning of the year, but this is not the only challenge”, one report said.
Rather than begin to strategize on how the country can adjust to this inevitability through diversification, public officials are promoting the hope that oil would remain in substantial demand up to 2045. So, what happens after 2045? The fact that the country is currently having challenges in selling its oil does not prompt concern in the appropriate quarters as if they have forgotten how coal became redundant after the world switched to fossil fuel.
The beggarly condition of the country is partly traceable to Nigeria’s political structure, in which the federation has increasingly taken a unitary structure, with enormous powers amassed at the center, and exploited by occupants of Aso Rock to pursue regional and ethnic interests. The states have unwittingly become mere geographical expressions to reflect the trumpeted federation. This situation underscores the trenchant clamour for restructuring in the South West, and succession in the South East, both of which are fiercely opposed by the core north. The country expectedly exists in perpetual turbulence and at the cusp of collapse.
This scary scenario became accentuated from 2015 as the incumbent administration brazenly deactivated provisions of federal character and concentrated key appointments in the hands of people from the northern region. Other arms of government were similarly emasculated as the country morphed into a pseudo-autocracy characterized by extreme nepotism and tribalism.
FAAC and other contrivances represent the failure of leadership and underdevelopment, which amplifies Nigeria’s lack of political engineering acumen to create an equitable system that enables the people harness whatever potential they have to develop themselves and resources at their own pace. The cap-in-hand conundrum does not just magnify laziness and dependence; it has proven unhelpful in building a just and competitive society.
Noteworthy is that in determining the occupant of the office of President, the federal character or zoning is jettisoned in favour of a free-wheeling approach characterized by conspiracies, regionalism, tribalism and fraud, all of which continue to sustain an unjust nation. Meritocracy never comes into play.
Since the sharing proceeds from crude oil revenue appears to be the only thing binding Nigeria together, its evaporation will naturally precipitate its disintegration. FAAC and FCC and other contraptions that currently sustain perpetual inequity and underdevelopment will naturally become extinct.
Nwachukwu can be reached via firstname.lastname@example.org (08023039360)