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Subsidy Removal Pushes FG, States, LGs Allocations to N10.14tn

The elimination of the subsidy on Premium Motor Spirit (PMS), commonly known as petrol, led to a significant increase in the statutory revenue allocations shared among the federal, state, and local governments in 2023, amounting to N10.14 trillion.

Data released on Tuesday by the Nigeria Extractive Industries Transparency Initiative (NEITI) in its latest report on Federation Account revenue allocations for 2023 revealed that the total allocation shared by the three tiers of government rose by N1.93 trillion compared to the previous year.

NEITI attributed this surge to the removal of petrol subsidy by President Bola Tinubu in May 2023, as announced during his inaugural address on May 29, 2023.

Tinubu’s declaration led to an immediate implementation by the Nigerian National Petroleum Company Limited, resulting in a spike in petrol prices from N198/litre to about N500/litre.

The cost escalated further within a month, reaching N617/litre at NNPCL-operated filling stations, while other marketers sold the product for between N660 and N700/litre depending on the location.

Dr. Ogbonnaya Orji, NEITI’s Executive Secretary, disclosed the report’s release at NEITI House, Abuja, stating that the agency initiated the NEITI FAAC Quarterly Review to enhance public comprehension of Federation Account allocations and disbursements as published by the government.

A breakdown of the revenue receipts showed that the Federal Government received N3.99 trillion, representing 39.37 percent of the total allocation, while the 36 states got N3.585 trillion (35.34 percent), and the 774 Local Government councils received N2.56 trillion (25.28 percent).

Further analysis revealed a N1.934 trillion increase, equivalent to 23.56 percent, in the disbursements in 2023 compared to the previous year’s N8.209 trillion.

The surge was attributed to improved revenue remittances to the Federation Account following the removal of petrol subsidy and the floating of the exchange rate by the new administration.

While the total distributed revenue from the Federation Account increased by 23.56 percent in 2023, the increment for each tier of government varied due to the revenue streams contributing to the inflows.

The report highlighted increases in allocations to the Federal Government by 16.79 percent, to state governments by 29.99 percent, and to Local Government councils by 26.22 percent compared to the previous year.

State by state, Delta State received the largest share of N402.26 billion (gross), followed by Rivers State with N398.53 billion, and Akwa Ibom State with N293.58 billion.

Derivation revenue, a significant portion of revenue for oil-producing states, was notable, with states like Delta, Akwa Ibom, Anambra, and Rivers receiving substantial shares exceeding their statutory revenues.

The report also addressed direct deductions from states, highlighting Delta State’s significant debt deductions in 2023. Lagos State recorded the least cumulative debt deductions.

In conclusion, NEITI’s report emphasized the need for government to adopt more conservative estimates for crude oil prices and output, prioritize economic diversification and investment, improve power generation, and address insecurity in rural communities to enhance the performance of the Federation Account.

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