The Federation Account received total revenue of N14.38 trillion in 2020 and 2021 with the minerals sector contributing N6.4 trillion or 45 per cent of total revenue remitted and the non-minerals sector contributing N4.8 trillion or 33 per cent of the total revenue, the Nigeria Extractive Industries Transparency Initiative, NEITI has reported.
NEITI in its 2020-2021 Fiscal Allocation and Statutory Disbursement Audit report unveiled yesterday in Abuja said the Federation Account revenue increased by 14 per cent during the period. A breakdown showed that while N6.7 trillion was received in 2020, revenue rose to N7.6 trillion in 2021.
The report stated that revenue from value-added tax, VAT, during the period was N3.18 trillion or 22 per cent of the total revenue remitted to the Federation Account.
In terms of disbursement, the report disclosed that N859.6 billion was deducted and distributed to the nine oil-producing states while the Federal Government received N2.8 trillion with states and local governments getting N1.45 trillion and N1.17 trillion respectively.
On a state-by-state basis, the Delta led recipients with N370 billion followed by Rivers (N298.68 billion) and Akwa Ibom (N281.78 billion).
Speaking at the unveiling of the report, the Executive Secretary of NEITI, Dr. Orji Ogbonnaya Orji explained that the report covered FAAC allocations to the three tiers of government and other statutory recipients including those agencies that received allocations.
“The report reviewed processes that characterised all transactions within the sector. It looked at an independent assessment of financial transactions in the areas of revenue receipts and payments and how the processes weighed on the scale of transparency and accountability in the oil and gas sector during the period under review.
“Other areas that NEITI focused on, in this report, were projects executed, deployment to capital projects and recurrent expenditure and how these aligned with the core responsibilities of the agencies, the government and citizens expectations”, he added.
He added the audit also covered four federal revenue-generating and eleven beneficiary agencies that are involved in the management of extractive industries funds. It also covered nine selected states: Akwa-Ibom; Bayelsa; Delta; Gombe; Imo; Kano; Nasarawa; Ondo and Rivers states.
Other findings of the report are highlighted as follows;
Out of a total Mineral Revenue of N6.40 trillion, the report said the DPR now NUPRC accounted for the highest contribution of about N2.71 trillion, or 18.83 per cent of the total remittances, followed by FIRS with N2.13 trillion, or 14.81 per cent, and NNPC with N1.55 trillion, or 10.8 per cent, while the least contribution was from the Solid Mineral with N13.33 billion, or 0.09 per cent.
The report revealed that the contribution by the NNPC declined significantly by 56 %per cent, along with the FIRS, whose contribution also dropped by 10 per cent . The decrease in the revenue remittances by both the NNPC and FIRS was attributed to the decrease in revenue generated from crude oil exports in 2021.
Similarly, non-mineral revenue of about N4.80 trillion (or 33.37 per cent of total remittances, increased by N3.86 billion from 2020 to 2021, with the highest contribution of N2.69 trillion, or 18.71% per cent coming from the Company Income Tax (CIT), followed with N2.025 trillion, or 14.08 per cent from the Nigeria Customs Service (NCS) and N85.25 billion, or 0.59 per cent from other tax sources.
While the revenue from CIT in 2021 declined by 5.25 per cent from 2020, the report said the revenue realised by the NCS in 2021 increased by 40.55 per cent, while other taxes significantly recovered from a deficit in 2020 to a positive balance in 2021.
However, the report said the remittances from royalty and other fee payments from the DPR and MMSD (solid minerals) increased significantly by 84 per cent and 43 per cent respectively for the corresponding years.
Receipts from VAT, which increased significantly for the two years period, resulted in the remittance of about N3.18 trillion (or 22.1% of total remittances to the Federation Account, while the revenue generated by the NCS increased by 41 per cent during the period under review.
Federal Government States and Local Government shared per cent5.42 trillion Mineral Revenue.
In terms of disbursements to the three tiers of government, the report showed that while a total of about N5.42 trillion was distributed to the Federal, State and Local Governments for the period, a total of per cent N859.66 billion was deducted as 13 per cent derivation and shared among the nine oil producing states after the deduction of excess petroleum profit tax (PPT) and Royalty.
The nine oil-producing states include Abia, Akwa-Ibom, Anambra, Bayelsa, Delta, Edo, Imo, Ondo, and Rivers.
A breakdown of the disbursements showed that while the Federal Government received about N2.80 trillion, the 36 state governments got N1.45 trillion, and the 774 Local Government Areas received a total of N1.17 trillion.
The report noted 2021 as the year with the highest revenue distribution across the board, with 2% increase between 2020 and 2021.
On a state-by-state basis, the report showed that the gross statutory revenue and VAT to the states from 2020 and 2021 was about N4.65 trillion, with Delta, Rivers, Akwa Ibom, and Lagos receiving the highest allocations for the period, while Gombe, Ogun, Ekiti, Plateau, Cross River, and Osun were states with the lowest allocations.
Disbursements to States in the six geopolitical zones
In terms of disbursements to States in the six geopolitical zones, the report said the South-South (SS) Zone allocation of N1.37 trillion, or 29.53 per cent of the total revenue, was the highest, as a result of the 13 per cent derivation revenue payment.
The allocations for the other zones, the report said, were: North-West N830.078 billion, or 17.85 per cent; South-West, N677.69 billion or 14.57 per cent; North-Central, N669.226 billion, or 14.39 per cent, and North-East N591.199 billion, or 12.71 per cent, while South-East had the lowest allocation of N509.59 billion, or 10.96 per cent of the total allocation.
Further breakdown of the details of the zonal allocations showed that in the South-South, Delta State received the highest allocation of N372.07 billion, followed by Rivers (N298.68 Billion), and Akwa Ibom (N281.78 Billion), while Cross River got the least allocation (N66.83 billion) during the year under review.
In the North-West Zone, Kano State got the highest allocation of N163.41 billion, followed by Kaduna (N130.02 billion), and Katsina State (N123.09 billion), while Zamfara got the least allocation of N84.81 billion for the period.
Lagos State received the highest allocation of N243.58 billion in the South-West zone for the period under review, followed by Oyo (N117.93 billion), and Ondo (N95.98 Billion), while Osun received the least allocation of N64.19 billion.
The Federal Capital Territory (FCT) got about N112.77 billion as the highest allocation in North-Central Zone, with Borno receiving N122.49 billion, as the highest allocation in the North-East Zone, while Imo State got the highest allocation of N113.45 billion in the South-East zone for the period under review.
Additional revenues from other sources
In terms of additional revenue from other sources such as exchange gain, excess crude, other non-mineral, solid mineral, and NNPC refunds, the report said a total of N972.705 billion was distributed among the three tiers of government.
A breakdown of the details revealed that while a total of N234.32 billion was shared as Exchange gain, the Federal Government collected N109.89 billion; States N55.73 billion, and N42.97 billion, while N25.72 billion was shared as 13% derivation revenue for the period.
Out of a total of N81.097 billion revenue shared as Domestic Excess Naira, the Federal Government got N37.168 billion; States N18.85 billion, and Local Governments N14.53 billion, while N10.54 billion was shared as 13% derivation revenue for the period.
From a total excess oil revenue of about N105.257 billion, the report showed that the federal government received N55.36 billion; States N28.079 billion, and Local Governments N21.648 billion, while N167.94 million was shared as 13 per cent derivation revenue for the period.
The federal government received about N126.67 billion out of the total N240.45 billion shared as non-oil Excess Revenue for the period, while the States got N64.25 billion, and Local Governments N49.53 billion.
Out of a total of N16.83 billion realised as Solid Mineral revenue, the Federal Government received N7.712 billion; State Governments N3.911 billion, N3.016 billion went to the Local Governments, while N2.1 billion was shared as 13% Derivation revenue.
In terms of FOREX Equalization revenue shared, the Federal Government got N21.083 billion out of a total of N46.00 billion, with the State Governments getting N10.69 billion, Local Governments N8,244 billion, while N5.98 billion was shared as 13% Derivation revenue.
From a total of N244 billion shared from FGN Intervention revenue, the report said the Federal Government received N118.68 billion, State Governments N60.19 billion, Local Governments N46.41 billion, while N18.72 billion was shared as 13 per cent Derivation revenue.
In terms of Excess Bank Charges, out of a total of 4.75 billion shared, the Federal Government took N2.50 billion, State Governments N1.27 billion, and Local Governments N978.85 million.
Revenue from Ministry of Mines and Steel Development
An analysis of revenue by State shows that seven out of the 36 states of the federation including the Federal Capital Territory (FCT) contributed 57.90 per cent (N7,741 billion) of the total revenue generated by the MMSD which is over half of the total revenue for the period under review.
The contributing states, including Ogun, Kogi, FCT, Lagos, Ebonyi, Edo, and Cross River State, each provided no less than five per cent of the total revenue. Ogun and Kogi State led in contributions, accounting for 12.76 per cent and 12.29 per cent of the total revenue respectively, the only states surpassing the 10 per cent threshold during the reviewed period. These significant contributions are attributed to the presence of major operators like Dangote, BUA, Lafarge, and Julius Berger in these states.
Enugu State often referred to as the ‘Coal city’ and known for its large coal deposit (one of Nigeria’s strategic minerals) contributed less than 1% to the total revenue.
NEITI report also outlined salient observations and made far-reaching recommendations as follows;
To enhance financial transparency; the government should implement measures to ensure that NNPC stops the recovery of expenses before remittance to FAAC. This will enhance financial transparency and
accountability in NNPC’s operations with the federation.
While the cessation of the subsidy regime has helped to block revenue leakages and improve government revenue, alternative mechanisms for supporting vulnerable citizens and mitigating price fluctuations should be explored.
To address the significant cost to the federation, the government should commission an independent consultant to conduct a comprehensive review and audit of the NNPC’s deductions. This will enhance accountability and identify areas for potential improvement or cost-saving measures.
On the need to review remittance mechanisms, the report recommended that NNPC’s returns from the sales of domestic crude allocated for refineries should be revised to be made in foreign currency instead of in naira. This adjustment will optimise the value of returns and better align them with international trade practices.
Remittance to the federation account is a function of revenue hence, the NUPRC should ensure that there is a robust system in place for blocking revenue leakages.
The NEITI report recommended full utilisation of the e-recording and e-archiving options for easy access to data.
“Government should develop and implement strategies that will help drive
investments (both local and foreign) to the mining sector and improve revenue generation. Efforts should be placed on developing high prospect minerals that can result in significant revenue generation and economic development. In addition, there should be a collaboration between all tiers of government to fight illegal mining operations that result in huge revenue losses.
The MMSD should engage with key stakeholders to develop a fiscal regime for the mining sector that ensures revenue transparency and helps track revenues from all mining operations, including taxes.
The publication of the FASD report is in fulfilment of Nigeria’s obligation to the global Extractive Industries Transparency Initiative (EITI) and in compliance with the provisions of the NEITI Act 2007.