Cross River And Other States In Fiscal Distress

In Breaking News, Business & Economy, National News

By CrossRiverWatch Admin

None of Nigeria’s 36 States could fully fund their 2019 budget with funds they received from both the federation account and internally generated revenues. In most cases, the funds couldn’t pay up to 50 per cent of their expenditures, writes Chineme Okafor and published by This Day Newspaper.

A new quarterly report – ‘analysis of 2019 FAAC disbursements’ – which the Nigeria Extractive Industries Transparency Initiatives (NEITI) released recently, has disclosed that States in Nigeria are in financial distress.

The report provided an analysis of the payout to the States by the Federation Accounts Allocation Committee (FAAC) for the year 2019.

It used data from the National Bureau of Statistics (NBS), NEITI’s attendance at FAAC meetings, and the Office of the Accountant General of the Federation to assess and reveal the financial struggles of the States.

According to the report, in 2019 the total FAAC disbursements were N8.147 trillion with the Federal Government’s share amounting to N3.376 trillion while the States and Local Governments got N2.761 trillion and N1.649 trillion respectively.

From the FAAC earnings of the states, the report also showed that a state – Osun – got the lowest disbursed figure of N24.14 billion in 2019 while Delta got the highest figure of N218.58 billion. In percentage terms, Osun’s FAAC earnings was only able to cover 37 per cent and 15.63 per cent of its recurrent and budget expenditures.

What they earned from FAAC.

In its analysis of the disbursement patterns, the NEITI disclosed that three states received less than N40 billion from the FAAC in 2019, and they included Osun – N24.14 billion, Cross River – N36.22 billion and Ogun – N38.63 billion.

It further stated that nine States received between N40 billion and N49 billion and they were Gombe which got 40.93 billion, Ekiti – N41.2 billion, Zamfara – N41.67 billion, Plateau – N42.13 billion, Kwara – N42.35 billion, Ebonyi – N44.54 billion, Nassarawa – N44.78 billion, Taraba – N46.43 billion, and Adamawa which was paid 48.25 billion from the FAAC.

Additionally, 14 States received between N50 billion and N59 billion. They included Yobe (N51.51 billion), Enugu (N51.89 billion), Abia (N51.93 billion), Kogi (N52.23 billion), Bauchi (N52.25 billion), Kebbi (N52.81 billion), Anambra (N53.8 billion), Benue (N54.24 billion), Sokoto (N55.38 billion), Oyo (N55.7 billion), Imo (N55.95 billion), Niger (N56.34 billion), Ondo (N57.79 billion), and Jigawa (N58.76 billion) while four states which received between N60 billion and N69 billion were Borno (N61.6 billion), Katsina (N63.14 billion), Edo (N64.43 billion), and Kaduna (N66.98 billion). Kano State received N82.34 billion.

Amongst the States which got more than N100 billion from the FAAC were Lagos – N117.76 billion, Bayelsa – N139.69 billion, Rivers – N158 billion, Akwa Ibom – N171.43 billion and Delta – N218.58 billion.

The NEITI report informed that four of the five States in the highly-paid categories were in the Niger Delta region – Rivers, Akwa Ibom, Bayelsa and Delta, and they earned that much on the back of the 13 per cent derivation principle.

Inadequate for recurrent, budget expenditure.

Despite their earnings, the NEITI explained that the States could not stay financially buoyant in 2019. It noted that net disbursements were only adequate in covering the recurrent expenditure of 15 States and inadequate in covering the full budgets of all the States.

“The values (net FAAC disbursements expressed as a percentage of recurrent expenditure) range between 36.9 per cent in Osun State and 151.8 per cent in Akwa Ibom State. The percentages were below 100 per cent in 21 States: Osun, Ogun, Oyo, Plateau, Kogi, Lagos, Kwara, Ondo, Abia, Ekiti, Adamawa, Taraba, Gombe, Edo, Bauchi, Niger, Benue, Sokoto, Cross River, Jigawa and Enugu.

“For these States, the implications are that net FAAC disbursements alone cannot service their recurrent expenditure. Thus, for their most basic expenditure, these States have to rely on both FAAC disbursements and IGR,” said the report.

“There are 15 States where the net FAAC disbursements expressed as percentage of recurrent expenditure was above 100 per cent. These States are: Bayelsa, Zamfara, Kano, Nassarawa, Delta, Katsina, Kaduna, Rivers, Anambra, Borno, Imo, Yobe, Ebonyi, Kebbi and Akwa Ibom.

“These figures mean that these States were able to fund their recurrent expenditure completely from their net FAAC disbursements. Thus, excess funds would be left for capital expenditure,” it added.

The NEITI also indicated that in terms of net FAAC disbursements expressed as a percentage of the State budgets for 2019, they ranged from 3.4 per cent in Cross River to 56.2 per cent in Yobe.

According to it, “the figures clearly indicate that no State was able to finance its total budget based on FAAC disbursements alone.”

It stated that the situation appeared quite critical, “as this percentage was above 50 per cent in only two States: Delta State (56 per cent) and Yobe State (56.2 per cent).”

“Thus, for almost all States, FAAC disbursements were quite inadequate in servicing their budgets. These States would need IGR to fulfil this purpose,” the NEITI further explained.

In terms of total revenue expressed as percentage of budgets, the NEITI equally stated that the total revenue of the States which included net FAAC disbursements and Internally Generated Revenue (IGR) ranged from 5.9 per cent in Cross River State to 72.9 per cent in Delta State.

“These percentages show that even with the addition of IGR to FAAC disbursements, no State can independently finance its budget. Thus, all States would be faced with the option of either not fully implementing their budgets or borrowing to achieve this,” the NEITI said.

The report thus indicated that in Cross River for example where its Government proposed a budget estimate of N1.043 trillion tagged budget of `Qabalistic Densification’ in 2019, it was only able to fund it by a meagre 5.9 per cent.

Better oil price could save the day.

Pointing to oil price variations as one of the reasons for low FAAC earning by the States in 2019, the NEITI therefore suggested that a healthier oil price in 2020 could help the States beat back their financial troubles.

It said that the monthly price of crude oil analysed between January 2015 and December 2019 showed that oil prices experienced a big drop from late 2018.

“Starting from January 2019, oil prices started rising, but have not reached the highest level experienced in 2018. The lower oil prices contributed to lower revenues which ultimately led to the lower figures for FAAC disbursements starting from January 2019.

“Average oil prices were $56.9 per barrel in 2019. Compared with average oil prices of $64.9 per barrel in 2018, average oil prices in 2019 were lower by 12 per cent,” the NEITI noted.

According to it: “Available data for the first month of 2020 shows average oil price of $58.6 per barrel. This suggests that oil prices have experienced an increase over the 2019 figures.”

The NEITI stated that if efforts by member countries of the Organisation of Petroleum Exporting Countries (OPEC) and its allies led by the Russian Federation to stem falling oil prices are sustained, then it is hoped that oil prices will not fall further, adding thus: “If this happens, it will result in increased revenue for the federation, and ultimately boost FAAC disbursements in 2020.”

The Central Bank of Nigeria (CBN) Governor, had said instead of depending on handouts from the Federation Account; States could explore their areas of strength to shore up their IGR.

Emefiele, had noted that looking inward remained a viable alternative to make the States viable in the face of the dwindling oil cash.

Emefiele said: “I do not think States can’t be viable. They were self- sustaining in the days of regions. I don’t like States coming to Abuja with pan in hands.

“We’ve abandoned agriculture. Everybody is now depending on oil. States can be viable if they leverage on their advantage.”

He had added: “Our story in rice production has yielded positive results. At this point it really fit to thank and commend the Federal Government for the border closure.

“Whereas at the CBN we have been doing everything possible through blocking of accounts and all that to restrict smuggling of rice into the country, but we think the border closure has resulted in very good result for all of us and I will give you an example.”

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