Nigeria’s federal account allocations rebound to 3-year high
Nigerian federal account allocations hit a three-year high in the eleven months through 2017, according to data compiled by BusinessDay, in what is a potential boost for government at all three levels faced with a biting revenue crisis.
The three tiers of government which comprise the Federal government, state governments and local governments, shared a total of N5.64 trillion in the period under review, according to data sourced from the National Bureau of Statistics (NBS), as the increase in global oil prices and recovering production volume lifted public earnings.
That amount represents a 14 percent increase from N4.94 trillion shared in the comparable period of 2016, barring December. December allocations for this year are yet to be made.
This year’s allocation is also 30.6 percent or N1.3 trillion more than the N4.33 trillion allocated in the first eleven months of 2015, making it the highest since 2014 when allocations totalled N7.9 trillion and a barrel of crude oil sold for as high as $USD106.
Like other commodity-dependent countries, Africa’s largest oil producer has had to weather the storm of declining petrodollars, following a lengthy collapse in oil prices which started mid-2014 and production disruptions inflicted by disgruntled militants who damaged oil pipelines in a clamour for better compensation for the oil extracted from their region.
Government revenue shed weight in line with shrinking oil prices that was caused by a rampaging supply glut. This left government at all levels struggling to pay workers’ salaries and execute badly needed infrastructural projects.
Oil prices have however enjoyed a renaissance in 2017, after output curbs by members of the Organisation of Petroleum Exporting Countries (OPEC) and Russia rid the market of some 1.5 million barrels daily.
Global benchmark, Brent crude has gained some 135 percent since hitting a decade-low of $28 per barrel in January 2016, trading at $66.4 per barrel as of Friday, December 29, according to Bloomberg data.
The estimated average oil price in 2017 comes to $55 per barrel, which is a 44.8 percent increase from 2016’s average of $38 per barrel.
Nigeria’s production has also recovered to 1.7 million barrels daily, according to OPEC data. That’s a 42 percent jump from when output crashed to 1.2 million in the thick of disruptions inflicted by militants in the delta.
It’s no wonder FAAC allocation, heavily reliant on oil revenue, has fattened this year. The outlook is for a sustained increase into 2018, on the back of benign projections for global oil prices and local production.
“Higher oil sales backed by the increase in price and output, as well as an increase in Value Added Tax (VAT) led to the increase in allocations this year,” Yemi Kale, Statistician General of the state-funded NBS told BusinessDay in a tweeted response on December 28.
A further breakdown of FAAC allocations in the past four years shows that the Federal government raked in N3.1trillion in the eleven months through 2014, while booking N2.4 trillion, N1.8 trillion and N2.3trillion in 2015, 2016 and 2017 respectively.
The states shared N1.8trillion in 2014, N1.4 trillion in 2015 as well as N1.2 trillion and N1.5 trillion in 2016 and 2017.
The local governments received allocations worth N1.3 trillion, N1.07 trillion, N928 billion and N1.14 trillion in 2014, 2015, 2016 and 2017 respectively.
“Higher oil prices and the relative peace in the Niger Delta which has led to stability in the level of oil production are the driving forces of increased FAAC allocations,” said Ayo Akinwumni, head of research, FSDH Merchant Bank.
“The recent high drive in the tax payment is also a major contributor to the increase in revenue,” Akinwunmi added by phone.
The FAAC disbursed the sum of N532.76 billion to the three tiers of government in November 2017 from the revenue generated in October 2017.
The amount disbursed comprised of N412.10bn from the Statutory Account and N89.71 billion from Valued Added Tax (VAT). Distribution of additional N30 billion from the NNPC and the distribution of N944bn being excess bank charges on federation account, as gathered from the NBS.
On yearly basis, the N532.7 billion allocated in November 2017 was 15.5 percent greater than N461.09 billion allocated in November of 2016 and was also more than the N440.13 billion allocated in 2015 by N92.57 billion or 20 percent.
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