Wednesday, February 21, 2018 / 3:00 PM / NEITI
Revenue to the Federation Account was significantly higher in 2017 than in 2016, indicating a marked improvement on falling revenue which started in 2014 with the fall in global oil prices. This increase in revenue was as result of rising oil prices and improved oil production, as restiveness in the Niger Delta subsided. These positive developments culminated in the country’s economy exiting recession in the second quarter of 2017.
This review provides an overview of FAAC disbursements to the three tiers of government in 2017 . Analysis is made drawing on data for disbursements in previous years and budget data. The review then makes some projections for government revenue in 2018.
Total FAAC disbursements in 2017 were N6.418trillion; 25.8% and 6.8% higher than total disbursements in 2016 and 2015 respectively; but 31.4% and 25.3% lower than the figures for 2013 and 2014 respectively.
Total FAAC disbursements in 2017 amounted to N6.418 trillion. This was 25.8% higher than total FAAC disbursements of N5.1 trillion in 2016. Also, total disbursements in 2017 were 6.8% higher than the N6.011 trillion disbursed in 2015. Thus, as seen from Figure 1, higher revenue accrued to the government in 2017 when compared with the previous two years. Figure 1 shows the distribution of quarterly disbursements. Total disbursements in 2017 were highest in the third quarter, with N1.929 trillion disbursed, while total disbursements were lowest in the second quarter (N1.377 trillion). Interestingly, the figures reveal that total disbursements were highest in the third quarter for 2016 and 2015. This is in line with previous reviews which found that disbursements were higher in the third quarter than other quarters. This could be attributable to increased demand for oil in the peak summer season of the third quarter.
Total FAAC Disbursements in 2017 Were 34.1% Lower than Total Disbursements in 2013 and 25.3% Lower than Total Disbursements in 2014
Although FAAC disbursements in 2017 were higher than the figures for 2015 and 2016, they were still lower than the figures for 2013 and 2014. Figure 2 shows that total FAAC disbursements in 2013 and 2014 were N9.742 trillion and N8.595 trillion respectively. Considering that total disbursements for 2017 were N6.418 trillion, the disbursements in 2017 were 34.1% and 25.3% lower than disbursements in 2013 and 2014, respectively. Thus, revenue has not yet increased to the pre-oil price crash levels.
Average Quarterly Total FAAC Disbursements Rose in 2017 but Have Not Reached the 2013 and 2014 Levels
Average quarterly FAAC disbursements were N1.604 trillion in 2017. This was higher than average quarterly disbursements in 2016 (N1.275 trillion) and 2015 (1.502 trillion). However, they are lower than average quarterly disbursements in 2013 (N2.435 trillion) and 2014 (N2.148 trillion). Figure 3 presents quarterly FAAC disbursements between 2013 and 2017. The figure shows that quarterly FAAC disbursements were above N2 trillion between the first quarter of 2013 and the third quarter of 2014. With the exception of the third quarter of 2015, quarterly FAAC disbursements experienced a continuous fall from the second quarter of 2014 until the second quarter of 2016. This mirrors the period of falling oil prices (figure 4). Although FAAC disbursements started rising from the third quarter of 2016, they have not reached the pre-price crash levels.
FAAC Disbursements to the Federal Government in 2017 Were Highest in July and Lowest in May
Total FAAC disbursements to the Federal Government in 2017 were N2.564 trillion. FAAC disbursements to the Federal Government in 2017 were highest in July when N286.6 billion was disbursed. This is 74.8% higher than the N163.9 billion disbursed in May, which was the month with the lowest disbursement. Figure 5 presents monthly FAAC disbursements to the Federal Government in 2017. Disbursements were N168 billion in January and this increased to N200.6 billion in February and then fell to N180.5 billion in March. This rising and falling trend in alternate months continued throughout the year, reflecting volatility in revenue for the Federal Government. This volatility can be attributed to volatility in oil production and prices. Such volatility will have a destabilizing effect on the execution of the federal budget.
FAAC Disbursements to State Governments in 2017 Were Highest in September and Lowest in November
Total FAAC disbursements to state governments in 2017 came to N1.859 trillion. Figure 6 presents monthly FAAC disbursements to state governments in 2017. The figure shows that states received the largest disbursements from the Federation Account in September with N215.8 billion. The lowest disbursement to states was recorded in November (N110.6 billion). This implies that the difference between amounts disbursed to states in the highest and lowest receiving months was N105.2 billion. This shows a 95.1% difference between the highest and lowest disbursements to states in the year. This further reiterates the volatility in government revenue.
FAAC Disbursements to Local Governments Areas in 2017 Were Highest in December and Lowest in January
Total FAAC disbursements to LGAs in 2017 were N1.502 trillion. Monthly FAAC disbursements to local governments in 2017 were highest in December (N207.7b) and lowest in January (N85.4b). This indicates a difference in disbursements of N122.3 billion between the highest and lowest months. Thus, disbursements in December were higher by 143% over disbursements in January. Again, this illustrates the high degree of volatility in government revenue across all three tiers of government and its consequent negative implications for the budgets.
FAAC Disbursements Were 30.1% Higher in the Second Half of 2017 than in the First Half
Figure 8 presents aggregate monthly FAAC disbursements for 2017. It can be observed that disbursements were generally higher in the second half of 2017 than the first half. Total disbursements in the first half of 2017 was N2.788 trillion while the figure was N3.630 trillion for the second half. Thus, disbursements in the second half of 2017 were 30.1% higher than disbursements in the first half. Again, the volatile nature of disbursements from FAAC is observed from Figure 8. Aggregate disbursements were highest in September (N809.1 billion) and lowest in May (N418.8 billion), indicating a variance of N390.3 billion. With the exception of two months (July and November), disbursements rose and fell in alternate months throughout the year.