Monday, December 11, 2023

FG, states, LGs record N413.3bn allocation shortfall

The three tiers of government suffered a shortfall of N413.3bn in allocation from the federation account within a two-month period covering January and February this year.

The shortfall was arrived at on an analysis of the difference between the projections of the 2020 Appropriation Act and the actual revenues generated and shared among the three tiers of government.

Allocation to the three tiers of government is made monthly by the Federation Account Allocation Committee.

The committee, headed by the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, is made up of commissioners of finance from the 36 states of the federation;  the Accountant General of the Federation, Mr Ahmed Idris and representatives from the Nigerian National Petroleum Corporation.


Others are representatives from the Federal Inland Revenue Service; the 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-statutory allocation, Value Added Tax distribution; and allocation 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 Value Added Tax revenue be shared thus: FG, 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.

Findings revealed that based on the fiscal assumptions underpinning the 2020 Appropriation Act, monthly FAAC disbursements to the Federal and State Governments were projected at N888.5bn.

However, due to the significant drop in international oil prices, FAAC monthly disbursements had declined to N716.3bn in January and N647.4bn in February.

This implies that the N716.3bn January allocation represents a shortfall of N172.2bn, while the N647.4bn shared in February is a shortfall of N241.1bn when compared to the monthly target of N888.5bn.

Faced with the threat of persistent shortfall in allocation which, according to the Minister of Finance may decline to below N400bn in the next three to six months, the Federal Government had on Monday approved the withdrawal of about $150m from the Stabilisation component of the Sovereign Wealth Fund.

The plan by the Federal Government to withdraw the sum of $150m from the stabilisation fund of the Sovereign Wealth Fund would reduce the amount in the account to $201m.

The fund drawn would be used to augment FAAC disbursements for June allocation.

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