Oil price slumps, shrinks FAAC disbursements to $1.9tr

 Oil price slumps, shrinks FAAC disbursements to $1.9tr

The slump in the international crude oil price took its toll on the Federal Account Allocation Committee (FAAC), as its disbursements between January and March 2019 dropped to $1.929 trillion as against N1.938 trillion disbursed for the same period in 2018; representing 0.45% reduction.

This information is contained in the latest issue of the quarterly review of the Nigeria Extractive Industries Transparency Initiative (NEITI).

According to the report, total FAAC disbursements in Q1 2019 ended the recent trend of over N2 trillion disbursements which lasted for three consecutive quarters of Q2 to Q4 2018.

A breakdown of the disbursements shows that the Federal Government received N803.18billion in the first quarters of this year. This was 1.18% lower than the N812.8billion the Federal Government received in the same period in 2018 and 46.2% higher than the N549.1 billion disbursed in the corresponding quarters of 2017.

A further breakdown shows that the 36 States shared N675.2billion in the first quarter of this year, representing 1.19% decline on the N683.4 billion disbursed to the states in Q1 2018 but 48% higher than the N456billion disbursed in Q1 2017.

From the review, only the N398.44 billion disbursed to local governments in Q1 2019 was higher by 1.28% when compared to N393.4 billion disbursed in the first quarter of 2018, and 47.8% higher than the amount disbursed to them in Q1 2017.

The NEITI review attributed the reduction in FAAC disbursements to drop in oil prices. “Oil prices experienced a downward spiral from November 2018. Oil prices were above $80 per barrel in October 2018 but by December 2018 they had dropped to $57 per barrel. Average oil price for the first quarter of 2019 was $63.17 per barrel. Average oil price for year 2018 was $71.06 per barrel. Thus, oil prices have been considerably lower in the first three months of 2019 than they were in 2018”, the Review stated.

The last issue of the NEITI Quarterly Review had projected continued increase in disbursements for 2019 based on the expectation that oil prices and oil production would continue to rise.

Another striking disclosure in the NEITI Quarterly Review is that this year’s budgets as already presented by 35 states cannot be adequately funded even by combined net FAAC disbursements to each state in 2017 and 2018. In addition, the NEITI Review also noted that total state revenues (FAAC and Internally Generated Revenue) in 2017 and 2018 cannot fund 2019 budgets of 28 states.

According to the NEITI publication: “there is no state whose net FAAC disbursements in either 2017 or 2018 can adequately finance their budgets for 2019, Net disbursements to states in 2017 as a percentage of the 2019 budgets ranged between 2.25% (Cross River) and 43.1% (Yobe). Also, net disbursements to states in 2018 as a percentage of the 2019 budgets ranged between 3.54% (Cross River) and 57.7% (Yobe). Thus, clearly, no state can finance its 2019 budgets solely based on FAAC disbursements.”

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