Covid-19: Govt Needs Innovative Approach To Weather Fiscal Distress, Says NEITI
As economies of the world, including Nigeria, continues grapple with the Covid-19 pandemic, the Nigeria Extractive Industries Transparency Initiative (NEITI) says it can no longer be business as usual for all levels of government in Nigeria.
NEITI in a recent report says, the Federal, States and Local Governments, can no longer wait for disbursements from the Federation Accounts Allocation Committee (FAAC) to implement their budgets as the pandemic has dealt a huge blow to global oil price, which accounts for a chunk of FAAC allocations.
To weather the storm, NEITI, in its latest edition of the Quarterly Review of FAAC disbursements, advised all tiers of government to adopt multi-innovative approaches including budget revision and improved Internally Generated Revenue (IGR).
“In light of the ‘double whammy’ of declining oil demand and oil prices as a result of the COVID-19 pandemic, government revenue would likely continue to fall in subsequent months.
“As global crude oil prices plummet in the midst of the global oil supply glut arising from lockdown of economic activities in many countries of the world, all tiers of government will struggle to fund their 2020 budgets,” NEITI said.
According to the review, the projected revenue for the Federal Government for the year stands at N8.42 trillion, comprising oil revenue of N2.64 trillion, non-oil revenue of N1.81 trillion, and revenue from other sources of N3.97 trillion. Oil revenue remained the dominant single source of revenue, with the figure of N2.64 trillion making up 31.35percent of total projected revenue.
While emphasising the need for innovative and concerted actions on the part of governments at all levels to mitigate the impact of Covid-19, NEITI says it welcomes the proactive measures already taken by the Federal Government. These include the approval to withdraw $150 million from the Stabilization Fund to supplement FAAC disbursements; initiating modalities for states to benefit from debt and interest moratorium, the review of the 2020 budget to reflect current economic realities and a $3.4 billion facility by the International Monetary Fund (IMF).
Commending these interventions, NEITI urged state governments to emulate FG’s initiatives by making necessary adjustments in their revenue and expenditure plans for the year.
“Following the lead of the FG, state governments will also need to revise their budgets and prepare for lower FAAC disbursements. The states might need to rely more on internally generated revenue (IGR) to service their budgets. However, it must be said that IGR depends largely on personal incomes, which will likely fall as the lockdown is prolonged and economic opportunities become scarce” the report pointed out.
Meanwhile, the review disclosed N1.95 trillion was disbursed to the three tiers of government and other statutory agencies in the first quarter (Q1) of 2020.
A breakdown of the disbursements shows that N791.4 billion went to the Federal Government, N669 billion was shared by the states and about N395 billion was shared by the 774 local government areas. The balance went to the North East Development Commission, the Excess Crude Account, Federal Inland Revenue Service (FIRS), Nigeria Custom Service (NCS) and the Department of Petroleum Resources.
Again, the FAAC disbursements to states in the period of review, showed a wide disparity between states as Osun State again received the lowest allocation of N6.44 billion and Delta State again with the highest disbursement, received N52.03, a difference of 708%.
The review also disclosed that Delta State’s net FAAC disbursements were higher than the combined total net disbursements of N50.67 billion of the six lowest receiving states, comprising Osun, Cross River, Plateau, Ogun, Ekiti and Gombe.
According to the review, 31 states received less than N20 billion as total net FAAC disbursements in Q1 2020 while only five states received more than N20 billion. The States are Lagos (N26.23 billion), Bayelsa (N35.14 billion), Rivers (N39.99 billion), Akwa Ibom (N40.61 billion), and Delta (N52.03 billion) respectively.