The three tiers of government – federal, state and local governments – shared N10.143 trillion from the Federation Account as statutory revenue allocations in 2023, latest data from the Nigeria Extractive Industries Transparency Initiative (NEITI) has shown.
This indicates an increase of N1.934 trillion or 23.56 per cent compared to the disbursement of N8.209 trillion shared in 2022.
This is even as analysts have said the gains of the 23 per cent increase in FAAC allocations have been eroded by the high rate of inflation in the country.
NEITI executive secretary, Dr Orji Ogbonnaya Orji, said this in a report on the Federation Account revenue allocations for the year 2023 released in Abuja on Tuesday.
Orji said the NEITI FAAC Quarterly Review was carried out to enhance public understanding of Federation
Account allocations and disbursements as published by the government.
He explained that the ultimate objective of the report was to strengthen knowledge, awareness and promote public accountability of all institutions in public finance management.
He said a breakdown of the revenue receipts showed that the federal government received N3.99 trillion, representing 39.37 per cent of the total allocation.
He added that the 36 states got N3.585 trillion, representing 35.34 per cent while the 774 local government councils shared N2.56 trillion, equivalent to 25.28 per cent.
“A further analysis of the N10.143 trillion disbursements in 2023 showed an increase of N1.934 trillion or 23.56 per cent when compared to the disbursement of N8.209 trillion shared in 2022.
“The review attributed the increase to improved revenue remittances to the Federation Account due to the removal of petrol subsidy and the floating of the exchange rate by the new administration.
“The report highlighted that while total revenues distributed from the account recorded an increase of 23.56 per cent in 2023, the increase accruing to each tier of government varied due to the type of the revenue streams contributing to the inflows into the Federation Account,” he said.
The executive secretary said the NEITI Quarterly Review of 2023 FAAC allocations revealed that the federal, state and local governments cumulatively received N1.934 trillion more than the amount shared in 2022.
He said allocation for the first quarter of 2023 increased by N579.71 billion (33.19 per cent) when compared to the first quarter of 2022, while the second, third and fourth quarters increased by 10.32 per cent, 27.49 per cent and 23.42 per cent respectively.
“The federal government’s share increased by N574.21 billion (16.79 per cent) from the N3.42 trillion it received in 2022 to N3.99 trillion in 2023.
“The state governments shared N3.59 trillion in 2023 compared to the N2.76 trillion they got in 2022, showing an increase of 29.99 per cent.
“Similarly, local government councils’ share of federation allocation was N2.57 trillion in 2023 compared to N2.032 trillion in 2022, which amounts to a 26.22 per cent increase, while total distributed revenue from the Federation account recorded an increase of 23.56 per cent in 2023,” he said.
He explained that the increase that accrued to each tier of government varied largely due to the type of revenue item that contributed to the inflows into the Federation Account.
“In the same period (2023), states and local governments recorded increases in their allocations of 29.99 per cent and 26.22 per cent respectively.
“The increase in allocation to the Federal Government, however, was 16.79 per cent,” he said.
Orji further said the state-by-state share of the allocations showed that Delta State received the largest share of N402.26 billion (gross), followed by Rivers which received N398.53 billion.
According to him, the figure is inclusive of the state’s share of oil and gas derivation revenue.
“Akwa Ibom State received the third largest allocation of N293.58 billion, Nasarawa State received the least amount of N73.32 billion, while Ebonyi and Ekiti states received N73.91 billion and N74.04 billion respectively.
“The review observed that the first five states that topped the allocation during the period under review are amongst the major oil producing states in the country,” said Ogbonnaya.
On the share of 13 per cent derivation revenue, he said nine states received the 13 per cent allocated to mineral producing states from proceeds of mineral revenue.
“The derivation revenue remains a significant portion of revenue for states like Delta, Akwa Ibom, Anambra and Rivers states.
“Also, the derivation revenues of states such as Delta, Akwa Ibom, and Bayelsa, which were 161.47 per cent, 141.25 per cent and 127.89 per cent respectively, eclipsed their statutory revenues.
“Rivers State’s derivation revenue was 74.15 per cent during the period. Notably, the other five oil producing states recorded lesser derivation revenue compared to the four above.
“For example, Ondo State had 27.71 per cent, Edo had 30.04 per cent, while Abia, Anambra and Imo recorded a derivation revenue of about 20 per cent or less,” he said.
The NEITI report noted that solid minerals producing states did not receive derivation revenues during the last quarter of 2023 because of the need to allow revenues to accumulate over a period of time before sharing.
Gains Of FAAC Increase Eroded By Inflation – Analysts
Commenting on this, the chief executive officer of Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, said that what the allocation can buy or projects it can implement is now reduced.
He noted that many of the projects have witnessed cost escalation due to inflation, particularly the exchange rate depreciation, and that many of the projects have foreign exchange components.
According to Yusuf, at the time the budget was planned, the exchange rate was around N700 per dollar “but now we are talking about the exchange rate going up to N1,500. The inflation has caused a lot of variation on the expenditure plan, either on recurrent expenditure or capital expenditure. This is going to affect the budget implementation because the value of the fund has been significantly depleted.”
The vice president, Highcap Securities Limited, Mr. David Adnori, corroborated that inflation reduces earning power of money, explaining that when prices rise, consumers lose purchasing power.
“This means that although the FAAC allocation is rising gradually, it is not rising the same as inflation does. The implication is that the government will have to spend more to execute projects than what they did in the past,” he explained.
