N28.58 Trillion Remitted To The Federation Account In Five Years

The Nigeria Extractive Industries Transparency Initiative (NEITI) has disclosed that N28.58trillion was remitted to the Federation Account between 2012 and 2016. The remittances came from three major sources: mineral revenues, non-mineral revenues and value added tax (VAT).

 

The information is contained in the agency’s latest Fiscal Allocation and Statutory Disbursement (FASD) Audit report for the period 2012-2016. Apart from remittances to the Federation Account, the audit tracked statutory allocations and their applications with specific focus on nine states, four interventionist agencies, and five special funds. The essence is to examine funds receipt and their utilization. This latest allocation and disbursement audit is the second by NEITI, the first cycle covered year 2007 – 2011.

 

The nine states covered by the statutory allocation and disbursement segment of the report are: Rivers, Bayelsa, Akwa Ibom, Nasarawa, Delta, Ondo, Imo, Kano and Gombe states. The Federal agencies are: Niger Delta Development Commission (NDDC), Petroleum Technology Development Fund (PTDF), Tertiary Education Trust Fund (TETFUND); and Petroleum Products Pricing Regulatory Agency (PPPRA). The special funds are: Natural Resources Development Fund (NRDF), Petroleum Equalisation Fund (PEF), Excess Crude Account (ECA), Ecological Fund (EF), and Stabilization Fund (SF).

 

A breakdown of the N28.58trillion remitted to the Federation Account shows that mineral source contributed highest sum of N18.15 trillion (after deductions for joint venture cash calls and subsidy claims), representing 64% of the total earnings, followed by non-mineral source N6.68 trillion, representing 23%, while value-added tax (VAT) was put at N3.73 trillion, representing 13%.

 

A year - by - year breakdown of the total remittances showed that N4.19trillion was remitted in 2012, while N4.73trillion was recorded in 2013. Furthermore, N4.69trillion was recorded in 2014 while N2.89trillion and N1.65trillion were remitted in 2015 and 2016 respectively.

 

Analysis of the N18.16trillion mineral revenues shared among the three tiers of government showed that Federal Government received N8.32 trillion from 2012 – 2016, the 36 State Governments shared N4.22 trillion while the 774 LGs got N3.25 trillion. This is exclusive of N2.36trillion 13% derivation to the oil, gas and mining producing states.

 

The report also disclosed that from the share of non-mineral revenues of N6.68 trillion, the federal government received N3.52 trillion, while the 36 states got N1.79 trillion and 774 local governments took N1.38trillion. The total VAT revenue of N3.73trillion was shared as follows: FGN - N560billion, 36 States - N1.88trillion and 774 LGAs - N1.31trillion.

 

NEITI report disclosed that out of the N18.15trillion recorded from mineral revenue within the period, highest receipt of N4.73trillion representing about 26.07% was recorded in 2013. It however noted that the plunge in global oil revenue from 2015 negatively affected mineral revenue remittances within the period. “There was a decrease in global oil revenue from 2015 which accounted for the decrease in mineral revenue from N4.69trillion in 2014 to N2.89trillion in 2015 and to N1.65trillion in 2016”, the report stated.

 

The report also revealed that out of total mineral revenue, the Nigerian National Petroleum Corporation (NNPC) remitted N8.62trillion, the Department of Petroleum Resources (DPR) remitted N3.80trillion, while Federal Inland Revenue Service (FIRS) remitted N10.46trillion, noting that NNPC remittances were highest in 2012 while its JV cash calls were highest in 2014.

 

NNPC’s net remittances to the Federation Account reduced from N2.38trillion in 2012 to N789billion in 2016. Out of the N18.16 trillion mineral revenues remitted in the period 2012-2016, the year 2013 accounted for the highest receipt of N4.73 trillion. There was a decrease in global oil revenues from 2015, which accounted for the decrease in mineral revenues from N4.68 trillion in 2014 to N2.89 trillion in 2015 and N1.65 trillion in 2016”, the report stated.

 

On revenues allocation and utilization by the states, the report disclosed that Akwa Ibom received the highest total mineral revenue of N873.59 billion among the nine states covered by the exercise. This was closely followed by Delta state that received N713.15 billion, while Nasarawa state got the lowest mineral revenue of N145.88 billion, closely followed by Gombe state with N155.22 billion. Imo and Ondo states received N190.42 billion and N247.87 billion respectively.

 

Another important disclosure by the report was the trend of lingering heavy dependence on mineral resources among the states for their revenue inflows within the period under review. “The states reliance on mineral revenue showed that between 40% and 73% of the States revenue is from mineral resources”, the report stated.

 

Among the nine states covered by the exercise, Rivers and Bayelsa states were the most heavily dependent on mineral resources. “Rivers State had an aggregate mineral revenue percentage of about 73% of its total revenue for the five years reviewed. Rivers State was followed by Bayelsa State with the second highest mineral revenue of 59%. With 32%, Imo State became least overall dependent on Mineral revenues”, the report noted.

 

Analysis of expenditure patterns among the nine states showed that from 2012 to 2016, Akwa-Ibom State committed the largest amount of N 947.79 billion into capital expenditure. This was followed by Delta State, which allocated N493.77 billion to capital expenditure. Nasarawa State had the least with capital expenditure of N65.11 billion followed by Ondo State with N138.67 on capital expenditure.

 

Furthermore, Kano State recorded N316.08 billion as capital expenditure within the period under review while Bayelsa spent N335.83 billion on capital expenditure. Imo and Gombe states spent N191.34 billion and N148.338 billion on capital expenditures respectively within the period under review. NEITI could not establish Rivers State’s capital expenditure because the State refused to cooperate with the audit review process.

 

Analysis of the states’ capital expenditures in relation to their total revenue revealed Akwa Ibom and Kano as states with relatively good records of capital expenditures. For instance, Akwa Ibom State spent 79% of its revenues on capital in 2012, 62% in 2013, 60% in 2014, 54% in 2015 and 48% in 2016, while Kano State spent 34% of its revenues on capital projects in 2012, 51% in 2013, 49% in 2014 and 61% in 2016. The capital expenditure profile of the states substantially complements their recurrent expenditure pattern.

 

The table below reveals details:

Capital Expenditure Pattern of the Nine states in relation to their Total Revenue (2012 -2016)

Capital Expenditure to Total Revenue
State 2012 2013 2014 2015 2016
Delta 43% 48% 35% 18% 31%
Kano 54% 51% 49% 41% 61%
Imo 39% 39% 48% 32% 42%
Akwa Ibom 79% 62% 60% 54% 48%
Ondo 37% 28% 18% 37% 27%
Bayelsa 27% 38% 28% 37% 34%
Gombe 44% 49% 40% 20% 35%
Nasarawa 20% 21% 27% 24% 26%

The major concerns remain that high recurrent expenditure of the states would negatively impact the available funds for capital expenditure denying the citizens the necessary infrastructure for their collective development.

 

Highlights of the revenues received by federal agencies and how they were spent as revealed in the report are discussed as follows:

  • Niger Delta Development Commission (NDDC) - The commission received billion within the period under review. Out of this amount, respectively on recurrent expenditure and capital related projects.
  • Petroleum Technology Development Fund (PDTF) - The Fund received a total of N124billion with signature bonus accounting for N119 billion or 96%. From the report, 37% of the expenditure was on assisted project, 20% was on scholarships while the balance of 43% was spent on administrative purposes. The report noted that it was difficult to ascertain the number of those beneficiaries (successful scholars) funded by the Fund under its overseas scholarship scheme (OSS) who actually returned to Nigeria after their programmes and became integrated in the Nigeria oil and gas industry.
  • Tertiary Education Trust Fund (TETFUND) - The Fund received a total of N993 billion with N805 billion from mineral revenue while N188billion was received from non-mineral. However, NEITI report noted that the Fund does not have a comprehensive accounting and operational manual; hence, there is insufficient guide for accounting and operations’ processes. This made it difficult to verify the income received from the various sources by the Fund and to evaluate the utilization of the money received.
  • Development of Natural Resources: The Natural Resources Development Account was established to develop alternative mineral resources. The total revenue received from 2012 to 2016 was N486.26billion. Out of this amount, the statutory allocation was N374.15 billion from both mineral and non-mineral revenue. A review of disbursement showed that N543.63 billion was released for various projects in the period, meaning disbursement outstripped inflows by 11%. The report noted that contrary to the purpose of the Fund, it served as aborrowing fund for the federal government to meet its obligations in areas suchas budgetdeficits, national security, Independent National Electoral Commission, Nigeria Armed Forces, among others.
  • Petroleum Equalisation Fund (PEF) - A total of N499 billion was received by PEF within the review period. Besides, PEF also realized N382 billion Bridging allowance. NEITI report revealed that most of its expense totaling about N303.4 billion was expended on claims. The report noted that the Fund does not impose penalties promptly on defaulting independent and major oil marketers that did not pay their required contribution. It also noted that utilization of the Fund is not separated between the core activity and administrative purposes.
  • Excess Crude Account (ECA) – The Excess Crude Account was created to warehouse the excess amount resulting from increases in crude oil prices. The objective is to use the proceeds as an augmentation tool if there is a shortfall in the revenue. However, there is a legitimacy/constitutional issue as the Excess Crude Account (ECA) has no constitutional backing. Total transfers to ECA within the period under review was N
  • Ecological Fund (EF) - The Fund is an intervention facility established to address serious ecological problems across thecountry. Statutory allocation from 2012 to 2016 was N276.5 billion while receipts from Excess crude oil was N54 billion. However, NEITI report noted that revenue paid into the Fund were utilized for purposes other than which the Fund was established. “…The utilization of the fund does not match the purpose for which the fund was established; for instance for the loan of N93,768,951,164 released to the Federal Government for funding of budget deficits and advance to States and Local Governments to meet shortfalls in their revenue”, the report stated.
  • Stabilization Fund (SF) – The Fund is a mechanism set up by government to insulate the economy from large influxes of revenue from commodities such as oil, and to maintain steady level of government revenue in the face of major commodity price fluctuations. A total sum of N238 billion was received as revenue into the Fund from 2012 to 2016. NEITI report disclosed that the Fund served as a pool to grant loans to various non-related expenditures during the period under review. Most of the disbursements made from the fund are described as loans but most of the loans granted seem not to be recoverable.
  • Nigerian Sovereign Investment Authority (NSIA) - The report disclosed that the Authority received a total of $1.250billion from the Federal Government for the purpose of investment within the period under review.
  • The Petroleum Products Pricing Regulatory Agency (PPPRA) - NEITI report disclosed that payment of subsidy by PPPRA was stopped in 2011. Since then, payment of subsidy is done through Debt Management Office (DMO).

NEITI Fiscal Allocation and Statutory Disbursement Audit 2012-2016, was conducted by the BDO, an accounting & auditing firm, on behalf of the Nigeria Extractive Industries Transparency Initiative (NEITI). The audit is in fulfillment of the NEITI Act 2007 and Nigeria’s obligation as a member of the global Extractive Industries Transparency Initiative (EITI). The overall goal is to provide citizens with data and information on allocation and utilization of extractive industries revenues in order to promote transparency, ensure public scrutiny, and enthrone accountability.