Uche Usim, Abuja
The three tiers of government and other statutory recipients of monthly subvention shared N2.054 trillion from the Federation Account Allocation Committee (FAAC) in the third quarter of 2020, despite the rampaging effects of COVID-19 pandemic.
A breakdown from the Nigerian Extractive Industries Transparency Initiative (NEITI) quarterly review shows that the Federal Government received N812.22 billion; state governments received N676.5 billion while local government areas got N429.16 billion. This was the first time that total disbursement has exceeded N2 trillion for a quarter in 2020.
The review further revealed that the combined disbursements of the four states with the highest disbursements (Delta, Rivers, Lagos and Akwa Ibom states) amounted to N144.48billion. This was higher than the combined total of N135.36 billion received by the 12 states with the lowest disbursements (Osun, Cross River, Plateau, Ogun, Ekiti, Gombe, Zamfara, Kwara, Nasarawa, Ebonyi, Taraba & Ondo).
On the revenue outlook for 2020 Q4, the NEITI review projected that actual oil revenue is likely to continue to outperform the projected oil revenue for the fourth quarter of 2020. However, it cautioned that even with projected improvement in revenues in 2020 Q4 and based on the total revenues received in the first three quarters of 2020, all tiers of government may struggle to meet the revenue projection in their revised budgets for the year.
The review analyzed FAAC disbursements in the third quarter of 2020, using data from the National Bureau of Statistics and the Revenue Mobilization, Allocation and Fiscal Commission.
“Total disbursements of N2.054 trillion in 2020 Q3 were 6.2% higher than total disbursements of N1.934 trillion in 2020 Q2, and 5.6% higher than total disbursements of N1.945 trillion in 2020 Q1”, the review stated.
However, the disbursements in 2020 Q3 were lower than those of the corresponding quarters in 2019 and 2018 as a whole and to the three tiers of government.
According to the review, 2020 Q3 disbursements were “9.6% lower than the N2.273 trillion disbursed in the third quarter of 2019 and 9.8% lower than the N2.278 trillion disbursed in the third quarter of 2018”.
Explaining further, the review stated that the Federal Government of Nigeria (FGN) received N812.22 billion in the third quarter of 2020, which was 11.7% lower than the N920.2 billion and 10.2% lower than the N904.8 billion the FGN received in the third quarters of 2019 and 2018 respectively.
The states on the other hand received a total of N676.5 billion in the third quarter of 2020, showing a decrease of 6.6% when compared to the N724.16 billion they got in the third quarter of 2019, and 5.9% lower than the N718.5 billion they received in the third quarter of 2018.
The local governments got a total of N429.16 billion in 2020 Q3. This was 9.6% lower than the N441.19 billion they got in 2019 Q3 and 9.8% lower than the N432.1 billion they received in 2018 Q3.
“The dip in disbursements between 2020 Q3 and corresponding quarters in 2019 and 2018 was largely on account of the impact of COVID-19 and its associated effects on demand for oil, oil prices, economic activities and other sources of revenues”, the review noted.
Further analysis reveals that disbursements to the three tiers of government fell between the first and second quarters, and then increased between the second and third quarters of 2020.
The review stated that: “Total disbursements to the FGN were N791.44 billion, N739.2 billion and N812.22 billion for the first, second and third quarters of 2020, respectively. This means that disbursements in the third quarter were 9.9% higher than disbursements in the second quarter, and 2.6% higher than disbursements in the first quarter.”
“For states, total disbursements were N669.02 billion in the first quarter, N629.26 billion in the second quarter, and N676.5 billion in the third quarter. Thus, disbursements to states in 2020 Q3 were 7.5% higher than disbursements in 2020 Q2, and 1.1% higher than disbursements in 2020 Q1.”
According to the review, “Local governments received total of N395.95 billion in 2020 Q1, N375.39 billion in 2020 Q2, and N429.16 billion in 2020 Q3. Thus, the disbursements to local governments in 2020 Q3 were 14.3% higher than the amount disbursed in 2020 Q2, and 8.4% higher than the disbursements in 2020 Q1”.
The NEITI review equally disclosed that: “Total FAAC disbursements in 2020 Q3 were higher than disbursements in either the first or second quarters of 2020, continuing a trend that stretches back to 2015”.
The review noted that higher disbursements in the third quarters of the years were generally on account of increased demand for oil during the summer season, and the attendant surge in oil prices. It also attributed rise in third quarter disbursements for this year to two primary factors:
“First, there has been increased demand for oil following the easing of the global economic shut-downs as a result of the COVID-19 pandemic. Second, the official exchange rate (earlier adjusted in March 2020 from N305/$1 to N360/$1) was adjusted from N360/$1 to N380/$1, and this will necessarily lead to higher disbursements from FAAC as revenues are shared in Naira”, the review stated.
On FAAC disbursements to states in 2020 Q3, NEITI review noted that there was wide disparity in the total net disbursements. This ranged between the lowest of N9.39 billion net disbursements to Osun State and the highest of N43.08 billion net disbursements to Delta State, indicating a variance of 358%.
According to the review, apart from the sharing formula, the amount of deductions carried out also plays a role in determining how much net disbursements are received by states. Yobe State had the lowest deduction of N81.98 million, while Lagos State had the highest deduction of N17.35 billion, which was 10% higher than the combined total deductions of 20 states (N15.72 billion).
