In a significant development for Nigeria’s fiscal landscape, the removal of subsidies on Premium Motor Spirit, commonly known as petrol, has led to a substantial increase in the statutory revenue allocations from the Federation Account shared among the country’s three tiers of government.
Data released by the Nigeria Extractive Industries Transparency Initiative (NEITI) in its latest report on the Federation Account revenue allocations for the year 2023 indicates a substantial rise in revenue, reaching a total of N10.14 trillion. This marks a notable increase of N1.93 trillion compared to the previous year.
The surge in revenue allocation was primarily attributed to the removal of petrol subsidies, a move initiated by President Bola Tinubu in May 2023.
Following Tinubu’s declaration during his inaugural address, the Nigerian National Petroleum Company Limited swiftly implemented the subsidy removal, resulting in a significant jump in petrol prices from N198/litre to approximately N500/litre.
Subsequent adjustments pushed the petrol prices even higher, reaching as much as N617/litre at NNPCL-operated filling stations, while other marketers sold the commodity at rates ranging from N660 to N700/litre.
NEITI’s Executive Secretary, Dr. Ogbonnaya Orji, highlighted the agency’s commitment to enhancing public understanding of Federation Account allocations and disbursements. The quarterly review aims to promote transparency and accountability in public finance management.
A breakdown of the revenue receipts revealed that the Federal Government received N3.99 trillion, accounting for 39.37 per cent of the total allocation, while the 36 states received N3.585 trillion (35.34 per cent), and the 774 Local Government councils shared N2.56 trillion (25.28 per cent).
Further analysis showed that the disbursements in 2023 witnessed a substantial increase of N1.934 trillion or 23.56 per cent compared to the preceding year. This increase was attributed to improved revenue remittances to the Federation Account resulting from the removal of petrol subsidies and the floating of the exchange rate by the new administration.
The report emphasised that while total revenues distributed from the Federation Account recorded an overall increase of 23.56 percent in 2023, the increase varied across each tier of government, influenced by the type of revenue streams contributing to the inflows.
State-by-state allocations revealed that major oil-producing states such as Delta, Rivers, and Akwa Ibom received substantial shares, with Delta State leading with a gross allocation of N402.26 billion.
The report also highlighted the significance of derivation revenue for mineral-producing states, emphasizing the importance of economic diversification efforts to reduce dependence on oil revenues.
NEITI’s recommendations included adopting conservative estimates for crude oil prices and output to enhance budgetary performance, prioritising economic diversification efforts, and addressing insecurity in rural communities to foster business growth and revenue generation.
The latest NEITI report underscores the imperative for concerted efforts by all stakeholders to ensure sustainable economic growth and fiscal stability in Nigeria.
