Low oil prices bring down FAAC allocation to N2.1 trillion
02 November 2016 |
2:53 am
According to NEITI, this is lower than what FAAC received during the first half of 2015, which was N2.89 trillion.The agency attributed the decline to the dependence of governments at all tiers on the oil sector...
Oil barrels
The Nigerian Extractive Industries Transparency Initiative (NEITI) has put the total Federal Accounts Allocation Committee (FAAC) disbursement to the three tiers of government for January to June 2016 at N2.01 trillion.
According to NEITI, this is lower than what FAAC received during the first half of 2015, which was N2.89 trillion.The agency attributed the decline to the dependence of governments at all tiers on the oil sector, and this fact highlights the vulnerability of public revenue to global oil market developments.
NEITI, which made the disclosure in its quarterly review released recently, said this shows that total disbursements dropped by 30 per cent between the first halves of 2015 and 2016.
It said total disbursements to the Federal Government fell from N1.23 trillion in the first half of 2015 to N854 billion in the first half of 2016.
This, it noted, represents a 30.9 per cent decline. “Total disbursements to States fell by 30.5 per cent from N1.009 trillion in the first half of 2015 to N701 billion in the first half of 2016. For Local Governments, allocations from FAAC dropped by 26 per cent from the N580.63 billion of the first half of 2015 and to the N429.43bn of the first half of 2016.
“It can be observed from the figure that, between the first half of 2013 and first half of 2016, FAAC disbursements have been falling. With the exception of the second half of 2015, FAAC disbursements are lower in the second half of the year when compared to the first half.
“While total disbursements were N5.17 trillion in the first half of 2013, they had dropped to N4.57 trillion in the second half of 2013. Total disbursements in 2014 also fell from N4.54 trillion in the first half to N4.05 trillion in the second half. While total disbursements in the first half of 2016 were N2.02, it is likely this trend may not continue given the rise in oil prices and the exchange rate and decline in militant activities.”
NEITI said that on the average, statutory allocations constituted 86 per cent of total disbursements to the Federal Government in the first half of 2016.
It added that statutory allocations make up 71 per cent of total disbursements to State Governments and 67 per cent of disbursements to Local Governments.
Thus, the Federal Government relies more on statutory allocations than the States or Local Governments. This should not be surprising since the Federal Government gets 52.68 percent from the Federation Account, while the states get 26.72 per cent and the LGAs receive 20.60 per cent. Because States and Local Governments receive more than the Federal Government from VAT, disbursements VAT accounts for a larger share in their allocations. In the first half of 2016, while VAT accounted for 6.59 per cent of total allocations to the FG, allocations from VAT accounted 26.79 per cent of disbursements to states and 30.65 per cent of disbursements to LGAs.
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