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State Of The State Presented By Dr Kayode Fayemi…

 

State Of The State Presented By Dr Kayode Fayemi

Comparative of CBN monthly economic report and the Monthly report of FAAC indicates that revenue accruing to the Federation Account were not fully reported;

 

Introduction

  • The Nigerian economy is highly dependent on the proceeds from sale of oil;
  • Oil represents 95% of Nigeria’s Foreign Exchange Earnings;
  • Oil also represents 80% of budgetary revenue for the Federation;
  • Revenue from Taxes, custom etc represents 20% of    budgetary revenue;
  • Income from revenue generating Agencies are expected to be transferred to the Consolidated Revenue account for appropriation;
  •  Annual budget is based on a predetermined oil output and a benchmark oil price below the international oil price approved annually by the National Assembly;
  • Nigerian Daily oil Quota is currently 1.96mbpd;
  • The Daily oil output is 2.6mbpd including condensates which are excluded from Opec oil quota and allowance for pipeline damage;
  •    The Average oil benchmark prices for National budget are as follows:
    •    Year 2013    $79pb
    •    Year 2014    $77.5pb
  •  Every State Government in Nigeria depends largely on the    Allocation from the Federation Account;
  • The Annual Budget of the State is predicated upon earnings from the Federation Account;
  •  Consequentially, any major change due to poor handling / depletion of the nations’ resources will usually have ripple effects on the implementation of Budget at the State and Local Government levels.
  •  The Average Actual oil production since January 2013 is not less than 2.4mbpd;
  •  Average actual oil prices received:
    •    Year 2013  is $95 – $114;
    •    Year 2014 is $110pb
  •  At no time did Nigerian Oil sell less than $95 in 2013 and $110 in 2014.
  • Conclusively, Nigerian earned more revenue from oil sales in 2013 and 2014 than budgeted;
  •  This can be corroborate by a comparison of revenue reported by CBN and the Federation Account Allocation Committee in Tables  1- 3 below:

COMPARISON BETWEEN CBN REPORT & FAAC REPORT ON REVENUE GENERATED IN 2013

  • Comparative of CBN  monthly economic report and the Monthly report of FAAC indicates that revenue accruing to the Federation Account were not fully reported;
  • NNPC has continuously failed to fully account and remit proceeds of all oil exports into the Federation Account;
  • The Federation account Allocation Committee reported underpayment of N3.03tn oil proceeds received by NNPC  to the Federation Account;
  • CBN recently reported underpayment of $20bn into Federation Account;
  • Interest earned on funds accruing to Federation account are  not properly accounted for;
  • Exchange rate used for receipts from sale of crude oil, gas e.t.c is N154.70 to $1. This is below the budgeted exchange rate of N160 to $1.
  • The use of flat exchange rate of N154.70 to $1 for computation of income accruing to the federation account is a deliberate step to reduce the funds available to States and LGAs;
  • The Accountant General of the Federal Government is also the Accountant General of the Federation. This negates the spirit of a true Fiscal Federation requiring the separation of the two roles;

The financial resources of  the States and LGAs are made up of the followings:

  • Revenue Allocation from Federation Account constitutes between 80% – 90% of total revenue for most states of the federation;
  • Internally Generated Revenue and other sundry sources constitute between 10%  – 20% depending on the available opportunities in the respective states;
  • Failure to fully account for revenue accruing to the federation has significantly affected distributable revenue to States and LGAs.

Impact of depletion of Federation Resources on Ekiti State

  • Report of earnings to the federation by CBN is an indication that we earn more revenue than reported into the Federation Account by the Federal Government.
  • The effect of the depletion of nations revenue has created huge financial burden for State to meet its obligations;
  • Average monthly reduction due to our state is N481m per month ;
  • Inability of the State Government to meet commitments as and when due  and increasing vicious circle of poverty in the country.

Request for Action

Considering the current high level of depletion of revenue accruing to the Federation account which is now a subject of dispute between FGN, CBN and NNPC, it is desirable that this august body is enjoined to critically assess revenue into Federation Account and direct;

  • That all revenue accruing to the Federation Account should only be reported in the Consolidate Revenue Fund;
  • The abolition of the Excess Crude Account which has allowed the Federal Government to manipulate the proceeds of earnings into the Federation Account;
  • The creation of the Office of the Accountant General of the Federation which shall be separate from the Office of the Accountant General of the Federal Government;
  • Creation of the Office of the Auditor General of the Federation which shall be separate from the Office of the Auditor General of the Federal Government;
  • Audit of NNPC Account;
  • Immediate payment of all outstanding revenue due to the Federation Account by NNPC;
  • Immediate review of the Revenue Allocation Formula which was last done 15years ago;