States, LGAs shared N8.8trn in 24 months, says NEITI

The 36 states, the Federal Capital Territory, and the 774 local government councils in the country received N8.79 trillion in 2020 and 2021 as Federation Account allocations, a report by the Nigeria Extractive Industries Transparency Initiative, NEITI, has indicated.

The Fiscal Allocation and Disbursements Audit, FASD, Report released last week showed that revenue includes income gross statutory allocations, value added tax and 13 percent derivation for mineral producing states.

According to NEITI, in terms of geo-political zone allocations, the South-South Zone received the highest allocation with N2.59 trillion or 29.53 percent of the total revenue shared to the federating units and this is as a result of the 13% derivation revenue allocated exclusively to nine oil producing states of which five of these states are from the SouthSouth geopolitical zone.

The allocations for the other zones during the period are: North-West N1.56 trillion or I7.85 percent; South-West, N1.28 trillion or 14.57 percent; North-Central, N1.26 trillion or 14.39 percent and North-East, 12.71 percent for the period under review. South-East had the lowest allocation, which accounted for N963 billion or 10.96 percent of the total allocation.

In the South-South Zone, Delta State with N372.07 billion received the highest allocation, followed by Rivers with N298.68 billion and Akwa Ibom with N281.78 billion, while Cross River had the least allocation with N66.83 billion during the years under review. Kano State received the highest allocation with N163.41 billion in the North-West Zone, followed by Kaduna with N130.02 billion and Katsina with N123.09 billion while Zamfara State with N84.81 billion had the least allocation for the years under review.

In the South- West zone, Lagos State received the highest allocation with N243.58 billion for the period under review, followed by Oyo with N117.93 billion and Ondo with N95.98 billion, while Osun received N64.19 billion, the least allocation. FCT in the NorthCentral Zone received the highest allocation with N112.77 billion; Borno State received the highest allocation in the NorthEast Zone with N122.49 billion. In the South East zone, Imo State received the highest allocation with N113.45 billion in the period under review.

Revenue remittance by NNPC
The NEITI Fiscal Allocations and Disbursement Audit report showed that total sales of oil and gas by the Nigerian National Petroleum Corporation, NNPC, during the period under review was N5.49 trillion however total How states, LGAs shared N8.8trn in 24 months — NEITI. Seeks NNPC probe over deductions By Obas Esiedesa, Abuja receipts during the same period was N6.05 trillion. The difference of N0.56 trillion was attributed to the cost of collection from prior period sales.

NEITI explained that sales refer to crude oil lifted for which payments are yet to be received. “The NNPCL records sales in the month they are made but has a 90-day window for receipt of domestic crude sales and 30 days for export sales”, it added.

It stated that receipts from crude sales accounted for N4.77 trillion or 78.82 percent of total sales with domestic crude representing 67.32 percent and export crude 11.50 percent of total receipts during the period. Overall, domestic receipts contributed the highest to total receipts with an inflow of N4.33 trillion or 71.53 percent out of the N6.05 trillion received during the period.

“This implies that bulk of Nigeria’s crude production is purchased by companies operating in Nigeria with less than 30 percent exported directly by the (NNPCL)”.

The FASD audit report stated that the total export receipts increased by N898.82 billion or 52.40 percent in 2021, adding that all elements of domestic receipts increased significantly, except for gas which declined by N44.16 billion or 71.99 percent and hence, diluted the overall increase in domestic receipts.

“As regards total export receipts, there was a decrease of N88.48 billion or 9.77 percent. This decrease was as a result of a material fall in export crude sales by N414.40 billion or 74.62 percent”.

The report disclosed that from the total receipts of N6.05 trillion, only N1.64 trillion or 27.12 percent was remitted to the Federation Account after deductions of N4.41 trillion. The largest components of NNPCL deductions were in respect of Joint Venture (JV) cash calls and subsidy recovery. While JV cash calls accounted for N2.19 trillion or 49.75 percent, subsidy recovery accounted for Nl.75 trillion or 39.62 percent, giving a combined total of 3.94 trillion or 89.37 percent of total deductions.

The report stated that total remittance to the Federation Account decreased by N557 billion or 50.67 percent in 2021, moving from N1.10 trillion in 2020 to N542.30 billion in 2021.

“The sharp decrease was as a result of subsidy recovery which significantly increased by N1.53 trillion (1,433.14%). At this rate of increase in subsidy recovery, there is likely to be no remittance by the NNPCL to the Federation Account”, the report declared.

On the defunct Department of Petroleum Resources, DPR, which has been replaced by the Nigerian Upstream Petroleum Regulatory Commission, NUPRC, following the enactment of the Petroleum Industry Act 2021, the report stated that the total revenue generated during the period under review was N3.37 trillion. Total revenue increased by N178.59 billion or 11.18 percent, moving from N1.60 trillion in 2020 to N1.78 trillion in 2021.

“This growth is driven by increase in royalties and other oil and gas receipts which grew by NI71.88 billion or 13.62 percent and N15.46 billion or 14.16 percent respectively. The revenue mix shows that royalties is the key revenue source of the agency as it accounted for 79.88 percent of the total revenue during the period. This revenue stream has maintained a contribution of over 78 percent in the periods under review. This revenue stream is driven by oil royalty which contributed 73.51 percent and 58.72 percent of stream and total revenue respectively.

The report added that while oil royalty and gas royalty increased by 21.26 percent and 188.35 percent respectively in 2021, JV royalty significantly decreased by 74.94 percent, moving from N269.06 billion in 2020 to N67.43 billion in 2021. It stated that revenue from gas flaring penalty increased marginally by N8.70 billion or 9.68 percent in 2021 as a result of more companies defaulting on gas flaring regulations. Also, signature bonus marginally decreased by N8.76 billion or 3.86 percent, falling from N226.96 billion in 2020 to N218.20 billion in 2021.

NEITI calls probe of NNPC’s deductions
Worried by the significant deductions made by NNPC on the Federation revenue, NEITI called on the Federal Government to commission a study on petroleum product importation, consumption and subsidy payment for the last five years to determine whether or not there were overpayments.

“The subsidy study should also cover post subsidy era to provide government with useful insight on petroleum products consumption in Nigeria.

The Federal Government should launch an investigation into NNPCL’s deductions. Specifically, there should be a JV value for money audit for the period 2017 to date”, it recommended.

We’re not paying attention to cash flows to states, LGAs – Nwadishi
Speaking on allocations to states and local councils, the Executive Director of Centre for Transparency Advocacy, CTA, Faith Nwadishi said finances at that level of government were not being scrutinized with so much focus on the Federal Government.

According to her, “We need to focus more on what is going on at the sub-national level. N8.7 trillion in two years is a lot of money. There is so much lack of transparency and accountability at the state and local levels of government.

“Ordinarily, that level should be of interest to citizens mostly but we are not seeing that. That amount of resources can be the foundation for economic growth and poverty alleviation. We need to begin to ask questions of the governors and local government chairmen. What have they done with these monies? How many schools, hospitals, roads and other infrastructures were built?

“These are the things we need to know at that level of governments and bringing up these questions would show that citizens are vigilant and are watching what politicians are doing with resources belonging to the people”, Nwadishi added.