Low Oil Price: FAAC Disbursement Records 41% Shortfall

Low Oil Price: FAAC Disbursement Records 41% Shortfall

The Nigeria Extractive Industries Transparency Initiative, NEITI, Sunday, disclosed that as a result of low crude oil price and Nigeria’s declining crude oil output, a 40.67 per cent shortfall was recorded in the Federation Account Allocation Committee, FAAC, disbursement to the three tiers of government from January to June 2017.

NEITI stated this in its Quarterly Review which focused on disbursement from FAAC.

NEITI explained that the expected FAAC disbursement for the three tiers of government in the six-month period was N4.7 trillion, the actual FAAC disbursement to them was N2.788 trillion, representing a shortfall of over 40.67 per cent.

It said, “The volatility nature of disbursements to all tiers of government in the first half of 2017 would suggest difficulty in implementing budgets at Federal, State and Local government levels. The volatility in revenue inflows will adversely affect planning and expenditure of government and thus likely hamper efforts at stimulating growth and development.”

Despite the drop in amount disbursed, NEITI said that a total of N513 billion was spent on debt servicing by the three tiers in the first quarter of 2017, as against N1.276 trillion disbursements in the first quarter.

It said, “This means that debt servicing took up 40.27 per cent of FAAC disbursement for the first quarter of this year.

“The figure reveals that debt servicing as proportion of total FAAC allocations is generally higher in the first quarter of the year, after which it falls to lower levels. Based on this, the figure of 40.27% observed in the first quarter of 2017 might be an upper threshold and it would thus be expected that this figure will be lower for the remaining quarters of the year.

“However, the Debt Management Office (DMO) is yet to provide data on the figure for the second quarter of 2017.”

In addition, NEITI said the three tiers of government (federal, states and local governments) shared N2.788 trillion between January and June this year, a 38% increase on the N2.019 trillion shared in the first half of 2016.

 Out of $2.788 trillion disbursed in the first half of 2017, NEITI said the Federal Government received N1.09 trillion, 36 state governments received N923 billion while N549.8 billion went to 774 local governments in the country.

“A further  breakdown  shows that total releases to the three tiers of government was N430.16 billion in January, N514 billion in February, N496.40 billion in March, N418.82 billion in April, N418.82 billion in May and N462.36 billion  in  June,” it noted.

NEITI argued further that, “Coupled with the low price of oil is the country’s difficulty in meeting the targeted/budgeted production rate of 2.2 million barrels per day. Production has consistently fallen below two million barrels per day since March 2016. Thus the double “whammy” of low oil prices and lower production that hit the country since 2014 has remained.”

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