The discontinuation of the subsidy on Premium Motor Spirit (PMS), commonly known as petrol, had a notable impact on the statutory revenue allocations from the Federation Account, resulting in a substantial increase to N10.14 trillion in 2023. According to data released by the Nigeria Extractive Industries Transparency Initiative (NEITI) in its latest report on Federation Account revenue allocations, this amount represented a significant rise of N1.93 trillion compared to the previous year’s allocations.
NEITI attributed this surge to the removal of petrol subsidy by President Bola Tinubu in May 2023. Following Tinubu’s declaration during his inaugural address on May 29, 2023, announcing the elimination of fuel subsidy, the Nigerian National Petroleum Company Limited promptly implemented the decision, causing petrol prices to soar from N198/litre to approximately N500/litre. Subsequently, prices continued to escalate, reaching N617/litre at NNPCL-operated filling stations and ranging between N660 and N700/litre at other outlets across various locations.
Discussing the report at the NEITI House in Abuja, NEITI’s Executive Secretary, Dr. Ogbonnaya Orji, emphasized that the NEITI FAAC Quarterly Review aimed to enhance public understanding of Federation Account allocations and disbursements. Orji highlighted the ultimate objective of fostering transparency and accountability in public finance management.
A breakdown of the revenue allocations revealed that the Federal Government received N3.99 trillion (39.37%), while the 36 states and the 774 Local Government councils of the Federation shared N3.585 trillion (35.34%) and N2.56 trillion (25.28%) respectively.
Further analysis of the N10.143 trillion disbursed in 2023 indicated a notable increase of N1.934 trillion (23.56%) compared to the previous year. This increase was attributed to improved revenue remittances to the Federation Account resulting from the removal of petrol subsidy and the floating of the exchange rate by the new administration.
While the total revenue distributed from the Federation Account saw a 23.56% increase in 2023, the distribution varied among the tiers of government due to different revenue streams. Notably, state and local governments experienced increases of 29.99% and 26.22% respectively, while the increase for the Federal Government was 16.79%.
In terms of state allocations, Delta State received the highest share of N402.26 billion, followed by Rivers State with N398.53 billion, and Akwa-Ibom State with N293.58 billion. Conversely, Nasarawa State received the least amount at N73.32 billion, while Ebonyi and Ekiti states received N73.91 billion and N74.04 billion respectively.
The report also highlighted the significant role of derivation revenue for mineral-producing states such as Delta, Akwa Ibom, Anambra, and Rivers, with some states experiencing derivation revenues exceeding their statutory revenues.
Furthermore, the report discussed the fluctuations in revenue remittances to the Federation Account due to variations in oil and gas revenue influenced by crude oil prices, Nigeria’s output, and activities such as crude oil theft and sabotage. It underscored the need for conservative estimates for crude oil prices and output to enhance budgetary performance and reduce budget deficits.
Additionally, the report recommended prioritizing economic diversification, investment in power generation, and addressing insecurity in rural communities to promote local production and reduce dependence on oil revenues. It stressed the importance of enhancing internally generated revenues through citizen-centered innovations and leadership.
