Salary Crisis Looms In States

Salary Crisis Looms In States
  • FAAC records N125bn revenue drop
  • Figure first in four years


Fresh economic crisis is in the offing in some states of the country as the Federation Accounts Allocation Committee Federal Allocation, FAAC, has announced a drop in the federation account.

FAAC had in January this year shared the sum of N574.66billion to the federal, states and local governments, an amount lower than the N699.82billion disbursed in December 2021.

It was anticipated that the fall in FAAC allocations followed the Federal Government’s plans to deduct N950billion for the payment of fuel subsidy from allocations due to states in 2022.

According to a communiqué issued at the end of a virtual meeting of the FAAC for February 2022, the N574.66billion total distributable revenue comprised distributable statutory revenue of N291.40billion, distributable Value Added Tax revenue of N178.06billion and Exchange Gain of N5.202billion and Non-Mineral Revenue of N100billon.

In January 2022, the total deduction for the cost of collection was N25.421bn and the total deductions for statutory transfers, refunds and savings was N92.767bn. The balance in the Excess Crude Account was $35.36m.

The communiqué confirmed that from the total distributable revenue of N574.668bn; the Federal Government received N204.580billion, the state governments received N179.251billion and the local government councils received N131.878billion, while a total of N58.959billion was shared to oil bearing states as 13% derivation revenue.

The distributable statutory revenue of N291.4bn was available for the month. From this, the Federal Government received N122.749bn, the state governments received N62.260bn and the local government councils received N48bn. The sum of N58.391bn was shared with the relevant states as 13% derivation revenue.

In the month of January 2022, the gross revenue available from the Value Added Tax was N191.2billion.

This was lower than the N201.255billion available in the month of December 2021 by N10.033billion.

The sum of N5.507billion allocation to NEDC and N7.649billion cost of collection were deducted from the N191.2bn gross VAT revenue, resulting in the distributable VAT revenue of N178.06billion.

From the N178.066billion distributable VAT revenue, the Federal Government received N26.710billion, the state governments received N89.033bn and the local government councils received N62.32billion.

According to the communiqué, in January 2022, Companies Income Tax, Petroleum Profit Tax, and Oil and Gas Royalties decreased significantly while Value Added Tax, Import and Excise Duties decreased marginally.

Economists told SUNDAY PUNCH that allocations to the three tiers of the government would continue to decline as long as the cost of fuel subsidy was deducted from the Federation Account.

This they said would have dire consequences on Nigerians as it would affect the capacity of the state government to pay salaries and that of the federal government to develop capital infrastructure.

 Meanwhile the Minister of State for Petroleum Timipre Sylva last week cried that rising crude oil price is not good for Nigeria.

Speaking on the rising crude oil prices in an interview with Bloomberg Television, Sylva said that Nigeria’s comfort zone in terms of oil prices was between $70 and $80 per barrel.

You would recall that on Thursday, the oil benchmark, Brent crude, added over 5% to trade at $102.27 a barrel with escalating tensions between Russia and Ukraine. This is the first time since the last administration of former President Goodluck Jonathan when the global price hit above 100 dollars.

The minister said Nigeria was not gaining anything from the soaring prices.

AljazirahNigeria reported that dearth of functional refinery was the bane of Nigeria’s gains in the business of crude oil.  Speaking with oil experts who craves anonymous said, “ How can this administration not know the value of crude oil? During the 2015 general elections, the APC promised us ‘One year, one Refinery’ but seven years down the line, we have no functional refinery. Not even one. But countries with functional refineries such as Algeria, Angola, UAE are jubilating, feeling the positive impact of the rise in global crude oil price but Nigeria is crying, he said.

Also subsidy burden, pipeline shutdowns are among the reasons why Nigeria is not benefitting from high crude oil prices.

“I’m hopeful the prices will move around, maybe $80, maybe $70. We are hoping it will come down to somewhere around $70 to $80, which will be sustainable for us by the end of the year”, Sylva said.

Last year, Nigeria voluntarily cut its daily crude oil production by 939,000 barrels between January and March after a meeting with the Organisation of Petroleum Exporting Countries ,OPEC, and its allies.

 But the Minister of State  for Petroleum Sylva still blamed it on the inability of Nigeria to activate the oil wells it shut down when OPEC instructed producing countries to cut production as well as the lack of investment in the upstream sector affecting the country’s ability to increase production.

He said Nigeria is losing at least 300,000 bpd to its capacity challenge.

“We are working hard on that, production increase,. What happened to us was the fact that we had to cut back at the time, and, of course, in such a way you can’t cut back mathematically”, he said.

 “So, you want to cut back 100,000 barrels that you shut out, maybe we’ll shut down about 200,000 to 300,000 barrels. So, at the end of the day, we over-complied because we just couldn’t achieve it mathematically.

“In trying to cut down, we cut down too much. And now to come back, it’s not been easy for us to get the wells back to production.”

According to the minister, a lot of additional investments would be needed to ramp up production, but he lamented that foreign funding was lacking for the industry.

On leveraging on the current crisis to supply gas to Europe, Sylva said he was not in the know of discussions with the United States for Nigeria to increase the supply of gas to Europe amid Russia and Ukraine tensions, though it will take time and investments.

Nigeria could have smiled at the bank instead the country is gnashing her teeth owing to the rise in crude oil price and the chunk amount taken out to fund the subsidy retention in 2022 which was not captured in earlier sent budget proposal.

The mono economy is not helping the country, the Federal government though into Agriculture should diversify to solid mineral and technology driven economy and strive to have at least a functional refinery to help take care of local fuel consumption and other sundry needs that accrues from the petroleum value chain.

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