States in Fiscal Distress
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, writesA new quarterly report – ‘analysis of 2019 FAAC disbursements’ – which the Nigeria Extractive Industries Transparency Initiatives released recently, has disclosed that states in Nigeria are in financial distress.
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.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.
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.Despite their earnings, the NEITI explained that the states could not stay financially buoyant in 2019.
“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. “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.
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. The NEITI stated that if efforts by member countries of the Organisation of Petroleum Exporting Countries 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.”
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