The Federation Allocation Account Committee (FAAC) disbursed a total of N8.52 trillion to the three tiers of government in 2018.
The amount disbursed exceeded N2 trillion in three consecutive quarters — the first of such occurrence since the third quarter (Q3) of 2014.
This information is contained in the 10th issue of the Nigeria Extractive Industries Transparency Initiative (NEITI) quarterly review.
A break down of the figures revealed that the highest quarterly amount of N2.299 trillion disbursed in Q4 2018.
This is the highest quarterly disbursement since Q2 2014 which recorded N2.520 trillion.
The lowest quarterly disbursement within the four year period was recorded in Q2 2016 with only N886 billion shared among the three tiers of government.
This was the period Nigeria eased into its worst recession in the last 29 years, on the back of low levels of crude oil prices which reduced to $50 per barrel between January and July of 2016.
Drawing comparison between the amounts disbursed between 2017 and 2018, the report said there were “striking increases” within the one year period.
For Q1 2018, total disbursements were N1.938 trillion, while total disbursements in the first quarter of 2017 were N1.411 trillion, representing an increase of 37.3 percent over the 2017 figures.
Total disbursements in Q2 2018 were N2.008 trillion while corresponding figures for 2017 were N1.377 trillion, an increase of 45.8 percent.
Total disbursements of N2.278 trillion was recorded in Q3 2018 and increased by 18.1 percent over the 2017 figures of N1.929 trillion.
Total disbursements in Q4 2018 was the highest at N2.299 trillion while corresponding figures for 2017 were N1.7 trillion, representing an increase of 35.2 percent.
“With the exception of the third quarter of 2017, there has been a consistent rise in quarterly disbursements since the second quarter of 2017,” the report read.
“These figures suggest that the nation might be getting back to the levels of revenue observed prior to the drastic fall in oil prices that started in 2014.
“However, disbursements have not yet reached the levels recorded in 2013 and 2014.”
FAAC disbursements to the three tiers of government were highest in December and lowest in February, with the exception of the record low of N128.30 billion local government councils received in April.
Oil revenue boosts FAAC allocation
The NEITI review gave an insight into the significant rise in FAAC disbursements to the three tiers of government, recorded in 2018.
Oil revenue was said to be the major contributor to the increase in FAAC allocation.
Going back to average daily oil production and prices from January 2015 to August 2018, the report explained that while prices started falling in 2015, production was still relatively stable.
However, oil production started falling in 2016 as a result of consistent attacks on oil facilities by militants and the subsequent shut-ins that major producers had to enforce as a result of the attacks.
This contributed to the plunge in the nation’s revenue and resulted in the drastic fall in FAAC disbursements which started in the fourth quarter of 2014.
In a remarkable turnaround, both oil production and oil prices started rising around the same time in 2017.
“The sustained rise, particularly in oil prices, has led to the continuous increase in FAAC disbursement,” the report read.
‘FAAC disbursements will keep rising in 2019’
Using trend analysis, the review projected that FAAC disbursements will keep rising in 2019.
Renewed optimism as a result of an increase in Nigeria’s oil production together with consolidated efforts by the Organisation of Petroleum Exporting Countries (OPEC) to keep oil prices from falling is expected to maintain the rise.
“With the concerted efforts by OPEC to limit oil production, coupled with sanctions on Iran and Venezuela oil exports, it is expected that oil prices will not fall to the very low levels experienced from 2014 to 2017,” the report read.
“Oil production is also expected to increase in 2019. An important offshore field – Egina – started production in late December 2018.
“With an optimum capacity of 200,000 barrels per day, production from this field and other shut-in fields whose production is expected to come back on-stream will increase the nation’s oil production.
“Increased oil prices and oil production bode well for government revenue.
“Thus, it is anticipated that FAAC disbursements will continue rising in 2019.”