Despite growth in cash disbursement to three tiers of government in Q1, Nigerians still groan

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Disbursement of cash from the federation account to the three tiers of government (Federal, State and Local) increased by about N30billion year on year in first three months in 2022 as N1.99trillion was doled out by the Federal Accounts Allocation Committee. Yet, some states are unable to fulfill some primary responsibilities like payment of salary of civil servants, gratuity and provision of basic infrastructure for the citizenry. BAMIDELE FAMOOFO writes.

Uba Group

Uba Group

In three months, Federal, States and Local Governments shared an estimated sum of N1.99trillion from the federation account. The amount was an increase of 6.4 percent or N120billion when put side by side with N1.87trillion shared in the first quarter of 2021.

A further breakdown showed that the three tiers of government received a monthly average increase of N40billion.

The increment was despite the refusal of the Nigerian National Petroleum Commission Limited, to remit money into the federation account beginning from January 2022, attributing its inability to do so to the heavy burden of fuel subsidy.

Meanwhile, a poverty assessment report on Nigeria, jointly conducted by the National Bureau of Statistics and the World Bank, released in March, suggested that about 40 percent of Nigerians live below the national poverty line, indicating that ability of government to earn more revenue is not transmissible to the people.

According to the report, which brings together the latest evidence on the profile and drivers of poverty in Nigeria, as many as 4 in 10 Nigerians live below the national poverty line.

“It is apparent that the three tiers of government are not willing to think out of the box to generate revenue outside oil to grow the economy as they have over the years relied heavily on cash shared by FAAC

Many Nigerians – especially in the country’s north – also lack education and access to basic infrastructure, such as electricity, safe drinking water and improved sanitation.

The report further noted that jobs do not translate Nigerians’ hard work into an exit from poverty, as most workers are engaged in small-scale household farm and non-farm enterprises; with only just 17 percent of Nigerian workers holding the wage jobs best able to lift people out of poverty.

Nigerians groan

Ayuba Wabba, President, Nigeria Labour Congress, lamented that the Nigerian workers and other ordinary Nigerians are the ones bearing the brunt of government’s financial misappropriations at all levels.

Wabba, who spoke during an interview on a television station as workers marked their day on May 1, said many state governments are unable to pay staff salary and gratuity.

He bemoaned the attitude of the federal government to the Academic Staff Union of Universities and other labour unions who have embarked on strike action for non-implementation of promises to make the nation’s government-owned institutions of higher learning a conducive place to be for both the teachers and students.

It was reported by a newspaper that the Benue State Chairman of the Nigeria Labour Congress, Godwin Anya, said that state and local government workers in the state were groaning due to staggered payment of salaries.

He stated, “Workers in the state are owed 2017 salary arrears and the current payment of salaries is staggered. Local government workers in the state are owed nine months, primary school teachers are owed 10 months, while at the state level, it is five months. These are arrears for 2017. Some workers have not been paid since March. This year, the system is that they (the state government) pay some workers in a particular month and leave others.”

Also, the TUC Chairman, Gideon Akaa, said that the dwindling allocations had taken their toll on workers. Akaa said, “What we have is staggered payment of salaries, apart from the arrears the state government owes state workers which are five months. As for leave bonus and other entitlements, I cannot say anything.”

The Presidency had in January described Benue State Governor, Samuel Ortom, as a politician who offers excuses for his state’s challenges while blaming others for problems he has either failed to solve or has created.

This was as it said the governor has no reason to blame President Muhammadu Buhari for unpaid salaries of state government workers in his state.

“CBN"

The governor had lambasted the Buhari regime for the farmer-herder clashes in the state as well as the unpaid salaries of state government workers.

The Presidency asserted that Buhari has not failed to pay the salary of those working for the Federal Government and declared the failure of states to do so “a national disaster.”

Tougher days ahead

Figures released by the NNPC showed that the oil firm spent a total of about N675.93 billion in three months in 2022 on fuel subsidy. Breakdown indicated that N210.38bn, N219.78bn and N245.77bn were spent as subsidies on petrol in January, February and March 2022 respectively.

NNPC announced that it will also deduct N671.88 billion (under-recovery outstanding) from its remittance to FAAC for April, which is due to the federal government in May.

The said amount comprises the previous month’s outstanding and part of the February 2022 value shortfall.

“The estimated Value Shortfall of N671, 882,996,685.81 (consisting of N519 billion for estimated April 2022 recovery plus N152billion of March 2022) is to be recovered from April 2022 proceed due for sharing at the May 2022 FAAC Meeting,” NNPC said.

This is coming on the heels of heavy borrowing by the Federal Government to the tune of N39.5 trillion as at end of 2021 as well as revenue generation challenges.

FAAC disbursement

A breakdown of the Federation Accounts Allocation Committee from January to March 2022 showed that a total of N574.668 billion was shared in January 2022 among the federal, states and local government councils.

The amount comprised distributable statutory revenue of N291.400 billion; distributable Value Added Tax revenue of N178.066 billion and Exchange Gain of N5.202 billion and non-mineral revenue of N100.000 billion.

“The situation is becoming worrisome and the more we borrow, the more we surrender all our revenues to servicing, especially borrowing to pay petroleum subsidies”

In January 2022, the total deductions for the cost of collection were N25.421 billion and the total deductions for statutory transfers, refunds and savings was N92.767 billion.

In February, federal, state and local governments shared the sum of N695.033 billion as federation allocation by the Federation Accounts Allocation Committee for the month of February 20222.

Out of the N695 billion, gross revenue available was N177.873 billion, compared to N191.222 billion in January, while the Federal Government received the highest allocation of N239 billion from a total sum of N695.033 billion shared.

“From this stated amount, inclusive of Gross Statutory Revenue, Value Added Tax, Non-Mineral Revenues and Excess Bank Charges, the Federal Government received N236.177 billion.

“The states received N190.007 billion, the Local Government Councils got N140.612 billion, while the oil-producing states received N23.750 billion as derivation (13 per cent of Mineral Revenue),” the communiqué at the end of the meeting stated.

Statutory Revenue of N429.681 billion received for February was higher than the sum of N396.432 billion received in January by N33.249, as Petroleum Profit Tax (PPT) increased significantly, while Oil and Gas Royalties increased marginally, with Import and Excise Duties, Companies Income Tax (CIT) and Value Added Tax (VAT) all recording considerable decreases.

Similarly, a total sum of N725.571 was shared as FAAC allocation among the three tiers of government in March 2022.

The N725.571billion total distributable revenue comprised distributable statutory revenue of N521.169bn and distributable Value Added Tax revenue of N204.402billion.

The total deduction for the cost of collection was N44.411billion and the total deductions for statutory transfers, refunds and savings was N382.826billion.

Out of N725.571billion; the Federal Government received N277.104billion, states received N227.201billion and local government councils received N167.910billion while a total of N53.356billion was shared to the relevant states as 13 percent derivation revenue.

Out of the N521.169billion distributable statutory revenue, the Federal Government received N246.444billion, states received N125.000billion and local government councils received N96.369billion.

In the month of March 2022, the gross revenue available from the VAT was N219.504billion. This was higher than the N177.873billion available in the month of February 2022, by N41.631billion.

The sum of N6.322billion allocation to NEDC and N8.780billion cost of the collection were deducted from the N219.504billion gross VAT revenue, resulting in the distributable VAT revenue of N204.402billion.

From the N204.402billion distributable VAT revenue, the Federal Government received N30.660billion, the states received N102.201billion and local government councils received N71.541billion.

Internally Generated Revenue

It is apparent that the three tiers of government are not willing to think out of the box to generate revenue outside oil to grow the economy as they have over the years relied heavily on cash shared by FAAC.

The 36 states and FCT internally generated revenue amounted to about N849.12 billion in half year of 2021. No figure of IGR has been published by the National Bureau of Statistics since November 2021.

In the first quarter of 2021, the internally generated revenue was N398.26 billion while in the second quarter it amounted to about N450.86 billion. This indicates a positive growth of 13.21 percent.

Lagos state, as usual, has the highest Internally Generated Revenue with about N267.23 billion, in first half of 2021, followed by FCT with N69.07 billion, and Rivers state with N57.32billion. While Yobe state with N4.03 billion, recorded the least.

Internally Generated Revenue by zones in the first half of 2021 showed that the South West zone recorded the highest revenue which amounted to N385.41billion, followed by the South South zone with N156.17 billion, while the North East zone recorded the least internally generated revenue with N42.92 billion.

Analysts speak

Bismarck Rewane, Chief Executive Officer, Financial Derivatives Company Limited, said FAAC allocation is the major source of revenue for the central and subnational governments in Nigeria.

He noted that increment in FAAC allocation could support salary increment, and payment of arrears for civil/public servants.

It could also support increment in infrastructural and other capital spending at all levels of government. “However, given that Nigeria is in its election season, the increment may rather go into campaign and electioneering spending. Overall, it is expected that increased government spending would lead to increase in national income and improvement in consumer welfare. Contingent on lingering elevated energy prices supported by the ongoing Ukraine war, it is expected that FAAC allocation will further improve in the coming month.

“However, if the legacy constraints that have continued to undermine crude oil production intensifies, FAAC allocation may rather moderate,” he added.

Paul Alaje, Senior Economist with SPM Professionals, cautioned that huge subsidy payment by the Federal Government through the NNPC, is a red flag as it will pile up the country’s debt profile which is nearing N40 trillion.

“Already the World Bank has cautioned Nigeria on subsidy payment, noting that it may be too expensive to maintain in the long run and we have already earmarked N4trillion which was approved by the National Assembly for new borrowings to pay subsidy.

“The situation is becoming worrisome and the more we borrow, the more we surrender all our revenues to servicing, especially borrowing to pay petroleum subsidies,” he said.

On the solutions, he said “The federal government needs to reconsider the suspension of the PIA as it provides an avenue for huge investments and contributing meaningfully to Gross Domestic Product”

Also speaking, an economist, Musa Shuaibu said fuel subsidy payment has reached N600 billion in the first quarter of 2022 because of the rising prices of crude oil, which is now two times the amount benchmarked in the 2022 budget.

He added, “Oil prices have been climbing higher almost on a daily basis since Russia invaded Ukraine and the price has now averaged $110 per barrel. The implication is if we don’t refine crude in Nigeria; as such, we will need to pay more for subsidies as the price increases. Also, since the Federal Government does not have enough revenue to pay for the rising landing cost of petrol, they are left with no option than to borrow,” Shuaibu added.