Making revenue remittances more transparent



After protracted stalemates and series of postponements, the Federation Accounts Allocation Committee, FAAC, finally, penultimate week Friday July 20, 2018, shared the sum of six hundred and sixty eight billion Naira (N668 billion) for the month of May, despite lingering disagreements between the states and the Nigerian National Petroleum Corporation, NNPC, over alleged unwholesome remittance of revenues.
The lower tiers of government were virtually coerced to accept payments made by the NNPC despite misgivings over remittances made by NNPC. The states had to take what they were given due to pressures over unpaid salaries and other commitments which had accumulated. In the past couple of months, government activities in many states had virtually been grounded while allocations being awaited from FAAC were not forthcoming.
It is worrisome that complaints over shortages in revenue remittances by Federal Government’s revenue-making bodies, especially the NNPC, have not been addressed. Traditionally, NNPC’s operations are, at best, shrouded in mystery to non-oil minds, a situation that has fuelled allegations ofcorruption over the years. President Muhammadu Buhari who assumed the portfolio of Minister of Petroleum Resources on the ground that he would sanitise the oil sector is still being awaited to effect necessary reforms.
The Chairman, Commissioners of Finance Forum, Mr. Mahmood Yinusa, after the third FAAC failure, said: “It is no longer a joking matter. It has gone to the highest level. Mr. President is highly interested in this and he is taking his time to ensure the right thing is done”.
The irony here is that the NNPC is under the President who is the Minister of Petroleum Resources. The problem is simply being referred back to the office from which it emanated. When will the President come out with a once and for all solution?

In a system that works, it is the National Assembly that should be asked to look into the confusion of NNPC remittance of revenues. The constitution empowers the Federal Legislature to appropriate Federal funds and enquire into how they are spent. The National Assembly should be approached to call the NNPC to explain the confusion in the revenue remittances, but obviously, FAAC stakeholders feel more inclined to pass the buck back to the President.
Besides, this unwholesome dependency on oil rents by all tiers of government has gone on for too long. As long as oil continues as our mainstay, no regime will ever like to implement transparency in the oil sector. While we eagerly await the day when the system is restructured for stronger fiscal federalism, we call on the NNPC to be more accountable on Federal revenue remittance and win the confidence of all FAAC stakeholders for smoother running of governance.

FAAC overpaid states N10bn in bailout funds — Auditor-General


                                                Mr. Anthony Mkpe Ayine


The Federation Accounts Allocation Committee (FAAC) N10 billion in excess to states while sharing bailout funds in 2016, according to the annual report of the Auditor-General of the federation obtained by The Cable.
Recall that President Muhammadu Buhari approved the release of the funds in 2015 to help governors pay salaries in their various states, as loan facility that the states are expected repay over a period of 20 years.
In the report, the Auditor-General, Mr. Anthony Mkpe Ayine stated: “Our review of records at the FAAC secretariat revealed that under the salary bailout arrangement, the sum of N406.368 billion was the total principal amount released to state governments that benefited from salary bailout in 2015 and 2016 as recorded in the Office of the Accountant General of the Federation (OAGF) summary submitted for audit.
“Whereas audit scrutiny of the documents presented revealed that the actual total principal amount released to the benefiting states were the sum of N416.368 billion, resulting in an overpaid difference of N10 billion
“The FAAC secretariat is requested to explain this overpayment and take steps to correct its accounting records where appropriate.”
The Auditor-General further discovered understated repayments by Oyo and Cross River states, noting that the amount to be deducted from the two states is less than the amount repayable.
“We observed that the computation of the total amount of loan payable by each state on the salary bailout facility was based on the summation of the principal amount and the interest. Our examination of the records revealed that for Oyo and Cross River states, the total amount repayable by the two states was understated by N1.895 billion and N3.571 billion respectively, resulting to a total understated amount of N5.467 billion.
“The Accountant-General of the Federation has been requested to explain the reasons for the reduction in monthly deductions for the two states, and where necessary, re-compute the monthly deductions to arrive at the appropriate monthly deductions that would clear the accounts in 240 months.”
Section 85 (5) of the constitution requires the Auditor-General to submit the report on the audit of the accountant-general’s financial statements to the national assembly within 90 days of receipt of the statements from the Accountant-General.
In the executive summary, Ayine wrote: “The financial statements of the federal government for the year ended 31st December, 2016 were first submitted to me by the Accountant-General of the Federation on 30th June, 2017. Following my preliminary observations, the statements were significantly amended and resubmitted on 29th September, 2017. Further amendments to the financial statements led to another re-submission on 29th December, 2017 and 16th January, 2018 before the final version was eventually submitted on 20th March, 2018.”


FG’s borrowings for 2018 budget to hit N2tr — FSDH


                                     Ayodele Akinwunmi, Head, Research, FSDH Merchant Bank

FSDH Merchant Bank has projected that the federal government will borrow up to N2 trillion to finance its budget in 2018, describing the nation’s debt service-to-revenue ratio, which rose to 79 percent in first quarter 2018, Q1’18, as very high and unsustainable.
The bank also warned that the country cannot afford another level of naira devaluation as this will further worsen the public debt position.
These were highlights of the July edition of the bank’s monthly economic and markets outlook, titled: ‘Public Debt Vulnerable to Exchange Rate Movement.’
Speaking at the presentation of the report, Head of Research, FSDH Merchant Bank, Mr. Ayo Akinwunmi, said: “The signed 2018 budget comes with a deficit of N1.95 trillion and net borrowing of N1.64 trillion. The federal government says the net borrowing would be financed from N793 billion domestic borrowing and N849 billion foreign borrowing. FSDH Research expects a supplementary budget to cover additional critical projects and fuel subsidy payment. This may bring the total borrowing in excess of N2 trillion in the 2018 budget implementation.
FSDH Research expects that the budget deficit financing activities of the FGN may lead to an increase in yields in the domestic market from current levels. Corporates and governments may also soon start borrowing at higher interest rates from the domestic market.”
Speaking on the vulnerability of the country’s rising external debt to the dangers of naira devaluation, Akinwunmi stated: “FSDH Research notes that the growth in the debt stock is mainly driven by external debt and was accelerated by the devaluation of the Naira. FSDH Research believes that Nigeria cannot afford another level of devaluation; otherwise it will worsen the debt position.”
Meanwhile, the FSDH Research analysis shows that the ratio of domestic interest payment to the FGN revenue from the FAAC stood at 79 percent as at Q1 2018. The average in the last two years is 60 percent. This current rate, according to them, is very high and unsustainable.

Federation Account Allocation Committee (FAAC) to the three tiers of government amounted to N647bn (US$2.11bn) in March (from February revenues).

Federation Account Allocation Committee (FAAC) to the three tiers of government amounted to N647bn (US$2.11bn) in March (from February revenues).

A modest recovery in the FAAC distribution

The total monthly payout by the Federation Account Allocation Committee (FAAC) to the three tiers of government amounted to N647bn (US$2.11bn) in March (from February revenues). This was an increase of N11bn from the previous distribution. The local media coverage was particularly thin on this occasion, and lacked the usual commentary of the accountant-general of the federation. Distributions have picked up from the lows seen in 2015, 2016 and early 2017, and exceeded N600bn in the past four months.

· The gross statutory allocation consisted of N444bn and N113bn for mineral and non-mineral revenue respectively, compared with N405bn and N134bn the previous month.

· We would expect the rise in mineral revenue in view of the apparent pick-up in crude output. The lower collection from non-mineral sources is disappointing, given the positive statements emanating from the revenue collection agencies.

· After the deduction of collection costs, the states’ share of the statutory allocation was N131bn. (Oil-producing states received an additional N57bn.) This would not cover most states’ salary and other operating costs.

· The distributions are an important source of liquidity for the money market. This latest payout provided an inflow of about N330bn on Thursday (29 March). It represented the monies due to the state and local governments. The FGN’s share is paid into the treasury single account.

· We have taken the latest payout from local media reports. The data for earlier months in the chart are drawn from the NBS.

. Nigeria’s MPC keeps main interest rate at record high 14%: Nigeria’s central bank kept its main interest rate at 14% on Wednesday in an attempt to curb inflation especially in food prices, Governor Godwin Emefiele said. Emefiele said the nine committee members at the first rate-setting meeting of the year voted unanimously to hold the rate at a record high of 14%, where it has been since July 2016. (Source: Reuters)

. Nigeria’s Buhari approves US$1bn for weapons purchases: President Muhammadu Buhari gave approval to the military to make weapons purchases worth US$1bn to tackle rising insecurity, Defense Minister Mansur Dan Ali said. The decision to acquire new weapons was announced after Buhari met with security chiefs in the capital, Abuja, to review cases of violent unrest and conflicts in different parts of the country, Ali said in an emailed statement on Wednesday. (Source: Bloomberg)

. Nigeria’s active oil rigs hit three-year high: From a record low of 23 in December 2016, the number of the nation’s active oil rigs rose to 35 in February 2018, a level last seen in early 2015. The upturn in the rig count was mostly triggered by the recent rally in global crude oil prices and the suspension of militant attacks on oil facilities in the Niger Delta. (Source: Punch)