Meltdown depletes govts' monthly allocations http://www.vanguardngr.com/content/view/30379/41/
Written by Omoh Gabriel, Emma Ujah & Olasunkanmi Akoni
Friday, 06 March 2009












As FG, states, LGs share N446bn in Feb

LAGOS — As the global economic recession bites harder and the future of oil prices remain uncertain, the excess crude account has dried up as there was nothing in the account to share based on what the three tiers of government agreed on earlier.

Yesterday in Makurdi, Benue State, Minister of State for Finance, Mr. Remi Babalola, urged states to explore sources of revenue other than allocations from the central pool as a means of coping with the current financial meltdown, and advised the states to review their various policies in order to boost their internally generated revenue (IGR) to uplift the living standards of the people.

Also yesterday, Lagos joined its Ogun counterpart in announcing measures to cope with the crisis. At a briefing, the state Commissioner for Information and Strategy, Mr. Opeyemi Bamidele, his Budget & Planning colleague, Mr. Ben Akabueze and Special Adviser to the Governor on Taxation, Mr. Ade Ipaye, disclosed that Lagos State Government was suspending foreign trips by its officials and cutting off non-critical expenditure among other measures.

For the first time in several months, the meeting of the Federation Account Allocation Committee of February 2009 did not share any revenue from the Excess Crude Account. But the statutory allocation for the month fell short of expectation as the global oil price, a major source of revenue for the country dwindled below the budget mark thus leaving no accrual to the excess crude account.

Some states lost billions of naira compared with what they received in January 2009.
The Federation Accounts Allocation Committee (FAAC) shared a total N446 billion being the statutory and VAT allocations shared to all tiers of government at its February meeting. From the total disbursement of nets after deductions, the highest recipients are from the oil producing states with Rivers receiving N13bn; Akwa Ibom N9bn; Delta N7bn and Bayelsa N5bn. The highest recipients from non-oil producing states are Lagos N9bn and Kano N6bn.

The lowest recipients with less than N3 billion allocation each are Gombe, Nasarawa, Ebonyi and Ekiti States.
It will be recalled that last year, the CBN Governor Professor Chukwuma Soludo in Washington warned Nigerians saying that the amount saved from oil windfall in the country’s excess crude revenue account has been depleted and what is left will not tide the country over any financial downturn should oil price fall below the budget bench mark of $62 per barrel.

Financial challenges for Nigeria, by Soludo

Soludo had also said that the current financial and economic crisis portend some financial challenges for Nigeria as the prices of oil are on the downward trend.

According to him, much of the savings in the Excess crude account had been disbursed and what is left based on what the three tiers of government in the country agreed on will not be enough to make any significant impact on the budget if the prices of oil falls below the budget bench mark.

The CBN governor said the federation account committee agreed that N1trillion be set as the base for the savings and whatever is earned as excess revenue in any particular month that is above the one trillion mark, 80 per cent should be shared among the three tiers of government why 20 per cent is saved.

He disclosed that out of what was saved, the three tiers of government had agreed that the sum of $5.6 billion is to be spent on power, stressing that with the drop in the production level which has resulted in the drop of crude export as a result of the activities of the militants in the Niger Delta, part of the savings have been used to supplement the revenue allocation to the three tiers of government in months when available revenue falls short of the budget provision.

In a study carried by Vanguard in 2007 for the period 1999-2007 it was discovered that allocation to states in the six geo-political zones show that the South-South states where the oil producing states are received the highest allocation of N1.602trillion for both states and local governments in the zones. This was closely followed by the North West zone which had a combined allocation to the seven states and local governments in the area N1.182trillion. South West zone had a total of N952.239billion allocation to the six states and the various local governments in the zone.

North East zone followed with a total allocation of N789.210billion in the seven years this administration has been in power. North Central zone had a seven year allocation to both the states and local governments in the zone a total of N757.654billion while states and local governments in the South East had a total allocation of N625.620billion.

In the good oil boom years the Federal Government has received a total of N5.137 trillion as its share of the federation account in six years representing 45.9 per cent of the total allocation from the federation account. States, local governments and the federal capital territory FCT got N6.047 trillion during the period which represents 54 per cent of the allocation from June 1999- December 2005. This brings the total amount shared out from the federation account in the six years period to N11.185 trillion for the three tiers of governments.

This amount is the total net allocation to the various tiers of government in the country after allowance was made for total deductions from states for external and contractual obligations.

Babalola asks states to explore alternative revenue

Mr Babalola, who was the special guest at the Benue State Summit on the Global Economic Crisis held in Makurdi noted that the reality of dwindling oil money was too glaring to be doubted.

Highlighting the extent of the crisis on Nigeria, the minister noted that the crash of crude oil prices and the drop in crude production have put immense pressure on the Federation Account projections as well as the projections for all government programmes in 2009.

“Even the sharp reduction observed in the February 2009 allocations would have been more drastic if not for the depreciated exchange rate applied in the conversion of the oil proceeds. This situation calls for an urgent paradigm shift by all stakeholders, not only here in Benue State but nationwide. Superior resource management, quality expenditures and visionary leadership are sine qua non at this critical time.

“Any continued dependence on the Federation Account Allocation as a means of funding a state’s expenditures is unrealistic if electoral promises must be met. Therefore, the States must leverage the opportunities provided by the current global financial crisis to sustain and protect the social and economic gains made during recent years.”

Lagos suspends foreign trips, cuts down on non -critical expenditure, others

On its part, the Lagos State government has directed all ministries, department and agencies to look inwards and cut down as much as possible on avoidable and non- critical expenditure as part of measures to further checkmate the many effects of the current global economic recession on the state government.

Bamidele, who rolled out the measures adopted by the state Executive Council and Body of Permanent Secretaries, stressed that the move became necessary for all tiers of government to re-order their priorities in the light of prevalent world economic realities.

According to the commissioner, the following measures were directed to be taken by the state Executive Council:

*The immediate suspension of expenditure on frills such as gifts, T-Shirts, fez caps and other sundry public relations items.

*The suspension of non-essential international and local travels while travels considered essential must be approved by the governor.

*Running of all new foreign scholarships, although on going local and foreign scholarships will be maintained.

*Running costs of ministries, departments and agencies to be maintained at current levels, and

*The suspension of foreign medical treatment except in cases where medical treatment is not available locally