Federation Account: FG, states, LGs shared N8.9tn in 16 months.

Minister of Finance, Mrs. Kemi Adeosun

The near total reliance of the three tiers of government on revenue accruing to the federation for their everyday activities is a huge source of worry, IFEANYI ONUBA writes on how Federation Account Allocation Committee has distributed money among them in 16 months

the three tiers of government received a total allocation of N8.9tn in 16 months covering January 2017 to April this year, investigations have revealed.

An analysis of the Federation Account Allocation Committee distribution made by our correspondent on Tuesday in Abuja also showed that unlike in 2017 when revenue allocation to the three tiers of government was low, the 2018 fiscal period had been very rewarding despite crude oil production shut-ins.

The committee, headed by the Minister of Finance, Mrs Kemi Adeosun, is made up of commissioners for finance of the 36 states of the federation, the Accountant General of the Federation and representatives of the Nigerian National Petroleum Corporation.

Others are representatives of the Federal Inland Revenue Service; Nigeria Customs Service; Revenue Mobilisation, Allocation and Fiscal Commission as well as the Central Bank of Nigeria.

The Federation Account is currently being managed on a legal framework that allows funds to be shared under three major components of statutory allocation, Value Added Tax distribution and allocations made under the derivation principle.

Under statutory allocation, the Federal Government gets 52.68 per cent of the revenue shared; states, 26.72 per cent; and local governments, 20.60 per cent.

The framework also provides that VAT revenue be shared thus: Federal Government, 15 per cent; states, 50 per cent; and LGs, 35 per cent.

Similarly, extra allocation is given to the nine oil producing states based on the 13 per cent derivation principle.

A breakdown of the N8.9tn allocation showed that the three tiers of government shared N430.16bn in January 2017.

Out of this amount, the Federal Government, after deducting cost of collection to the revenue generating agencies, received N168bn; states, N114.28bn; and local government, N85.4bn.

In February 2017, the federation generated N514bn out of which the Federal Government’s share was N200.6bn; states, N128.4bn; and local governments, N96.52bn.

However, in March, revenue generation dipped to N466.9bn, and from it, the Federal Government got N180.5bn; state governments, N116.5bn; and local governments, N87.5bn.

The allocation declined further by N52.07bn to N415.73bn in April, with the Federal Government receiving N163.89bn; states, N117.59bn; while the local government councils got N87.77bn.

In the month of May last year, the FAAC distributed the sum of N462.4bn among the three tiers of government as statutory allocation, with the Federal Government receiving N147.7bn; states, N74.9bn; and local government councils, N57.8bn.

For June 2017, the sum of N652.2bn was shared, with the Federal Government receiving N286.6bn; states, N178.6bn; and local government councils, N134.9bn

The month of July last year witnessed a plunge in revenue as the sum of N467.85bn was shared; the Federal Government received N193bn; states, N130.69bn; and local government councils, N98bn.

For August, the committee distributed the sum of N637.7bn, with the Federal Government, state and local governments receiving N260.6bn, N132.18bn and N101.9bn, respectively.

In September, a total sum of N558bn was shared with the Federal Government receiving N210bn; states, N140.45bn; and local governments, N107.4bn.

For the month of October the sum of N532.7bn was shared, while November had a total amount of N609bn allocated to the three tiers of government.

In the month of December, the distributed revenue went up to N655.17bn before dropping to N635.5bn in January 2018.

However, the distributed revenue to the three tiers of government rose again in February 2018 from the January figure to N647.390 before dropping to N626.82bn in March this year due to revenue underpayment by the NNPC.

But despite the revenue underpayment, the revenue allocated to the three tiers of government rose significantly in the month of April as the committee distributed N701bn.

Speaking on the development, the Chairman, Forum of Finance Commissioners of the FAAC, Mr Mahmoud Yunusa, said state governments had resolved to begin an aggressive drive to shore up their internally generated revenues from next year.

The move, according to him, is part of measures aimed at reducing the overdependence of state governments on revenue from the Federation Account.

He said the states would be setting up machineries to boost their IGR.

Yunusa stated, “There are lots of states that are doing very well in terms of revenue generation and most of the states in the North-East have also started doing very well because there are improvements in commercial activities and taxes are being collected in these areas.

“A lot of states are really making progress, but we are far away from what we should be and we will get there very soon. If there is one restructuring that is very difficult, it is to restructure the revenue base.

“Our intention is to really reduce significantly the overdependence of states on revenue that comes from the centre.”

He added, “We want to set a machinery by giving ourselves some time to raise our revenue, and a lot of states are on course and in the next one year, we will see a significant improvement along that line.

“And we will give the Federal Government a break but with our eyes open on what is supposed to get to us.”

Yunusa, who is also the Commissioner for Finance in Adamawa State in FAAC, said the committee was targeting a monthly revenue allocation of N1tn from the Federation Account to the three tiers of government.

He stated, “I think there is an improvement in revenue figures because we are about crossing the N600bn mark, but we are far from where we should be because we want to get to the N1tn mark as quickly as possible.

“As states, we are working very closely with all the revenue generating agencies of the Federal Government and also within ourselves to ensure that we remit withholding taxes and VAT in our respective states to increase the revenue that will be generated from the non-oil sector.

Speaking on the allocations to the three tier of governments, some finance and economic experts said that while the country had been badly hit by the decline in oil production and revenue as a result of the activities of militants in the Niger Delta, there were a lot of untapped resources at the states, which could be developed for economic prosperity.
Courtesy: The Punch