Subsidy Removal: FG, States, LGs Allocations Hit N10.14tn in 2023

Eko Hot Blog reports that the removal of fuel subsidy on Premium Motor Spirit (petrol) by President Bola Tinubu in May 2023 has significantly boosted the statutory revenue allocations from the Federation Account to N10.14 trillion in 2023, according to the latest report by the Nigeria Extractive Industries Transparency Initiative (NEITI).

The report, released on Tuesday, revealed that the amount shared by the federal, state, and local governments increased by N1.93 trillion last year compared to 2022, with NEITI attributing this surge to the removal of the petrol subsidy.

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A breakdown of the revenue receipts showed that the Federal Government received the lion’s share of N3.99 trillion, representing 39.37 percent of the total allocation. The 36 states collectively received N3.585 trillion, accounting for 35.34 percent, while the 774 Local Government councils across the Federation shared N2.56 trillion, equivalent to 25.28 percent.

Further analysis of the N10.143 trillion disbursements in 2023 showed a significant increase of N1.934 trillion, or 23.56 percent, when compared to the N8.209 trillion shared in the preceding year of 2022. The NEITI review attributed this increase to improved revenue remittances to the Federation Account due to the removal of the petrol subsidy and the floating of the exchange rate by the new administration.

While the total revenues distributed from the Federation Account recorded an overall increase of 23.56 percent in 2023, the increase accruing to each tier of government varied, largely due to the type of revenue streams contributing to the inflows into the Federation Account. The Federal Government’s share increased by N574.21 billion (16.79 percent) from the N3.42 trillion it received in 2022 to N3.99 trillion in 2023. The state governments shared N3.59 trillion in 2023 compared to N2.76 trillion in 2022, showing an increase of 29.99 percent. Similarly, Local Government councils’ share of federation allocation was N2.57 trillion in 2023 compared to N2.032 trillion in 2022, amounting to a 26.22 percent increase.

On a state-by-state basis, Delta State received the largest share of N402.26 billion, inclusive of the state’s share of oil and gas derivation revenue. Rivers State followed closely with N398.53 billion, while Akwa-Ibom State received the third-largest allocation of N293.58 billion. Nasarawa State received the least amount of N73.32 billion, while Ebonyi and Ekiti states received N73.91 billion and N74.04 billion, respectively.

The NEITI report highlighted that nine states received the 13 percent allocated to mineral-producing states from the proceeds of mineral revenue. The derivation revenue remains a significant portion of revenue for states like Delta, Akwa Ibom, Anambra, and Rivers.

In its recommendations, NEITI called on the government to adopt more conservative estimates for crude oil prices and output to enhance budgetary performance, reduce budget deficits and borrowing, and strengthen fiscal stabilization. The agency also renewed its earlier recommendations for the Federal Government to prioritize economic diversification efforts and invest in improving power generation to encourage small, medium, and large businesses to promote local production, reduce imports, and reduce dependence on oil revenues.

NEITI’s FAAC Quarterly Reviews also underlined the need for states to collaborate with the Federal Government in addressing insecurity in rural communities where agro-based businesses thrive, pay attention to internally generated revenues through innovations and citizen-centered leadership.

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