Nigerian-Newspaper.com
Nigerian Newspaper Home Homepage Submit Articles Social Network Contact Us

FACTS ON REVENUE ALLOCATION TO STATES IN NIGERIA BETWEEN
MAY 1999 AND DECEMBER 2005

*Olusanya E. Olubusoye (Ph.D)
Centre for Econometric and Allied Research (CEAR)
&
Department of Statistics
University of Ibadan
Ibadan, Oyo-State
Nigeria
Email: oe.olubusoye@mail.ui.edu.ng  or busoye2001@yahoo.com
 

 Published Monday, April 9, 2007

The most contentious issue in the Nigeria’s Federalism is perhaps the revenue allocation to the three tiers of government. Previous discussions on the subject always lacked intellectual and statistical evidence. The aim of this paper is not to delve into discussions of the politics of this exercise, but rather, to x-ray the pattern and quantum of distribution; first among the 36 states and second among the six geo-political zones. This is necessary so as to provoke further enquiry into the expenditure pattern of this tier of government and put to question the issues of accountability and probity in spending. The study also put to question the legitimacy of various agitations by some states and by extension geo-political zones.

The study covers a period of 80 months beginning from May 1999 to December 2005. The choice of May 1999 is highly significant as it marked the inauguration of the third republic and it is widely believed that never before then had government at all levels had so much fund at their disposal. Again, before this period, allocation figures were never made public. The entire data for the study were obtained from the website of the Federal Ministry of Finance – www.fmf.gov.ng. Several inadequacies and limitations were observed in the data set. For instance, allocations for some months (July 1999, September 1999, October 2001, May 2002, September 2002 and August 2005) were either duplicated or conspicuously missing without explanation. There were also inconsistencies in figures, computational errors and lack of definitions and formulae for the various items of revenue and deductions. Notwithstanding the identified lapses, the data set still provided reasonable level of accuracy needed for meaningful inference. Basically, there are four items of revenue allocation and three items of deduction. The revenue items are: statutory allocation, 13% share of derivation, crude oil excess proceeds and value added tax (VAT); while deduction items are: external debt, contractual obligation and “others”. Other deductions cover; National Water Rehabilitation Projects, National Agricultural Technology Support Programme, Recovery of Debt owed to FIRS (WHT &VAT), Payment for Fertilizer, State Water Supply Project, State Agricultural Project, National Fadama Project and Repayment to NEPA.

There are six geo-political zones in the country and 768 Local Government Areas (LGAs). The following chart shows the percentage distribution of the LGAs according to the geo-political zones. The North-West zone has the highest percentage of the LGAs, 21%. Others are: North-Central (18%), South-West (18%), South-South (16%), North-East (15%), and South-East (12%).


 

Gross and Net Statutory Allocations

The Table below gives the summary of total allocations and deductions for all items including the net allocations during the period under consideration. The gross and net statutory allocations are 2.3 trillion and 3.4 trillion naira respectively. The breakdown of the two allocations for all the states showed that Kano State had the highest Gross Statutory allocation of N95.3 billion. It was followed by Lagos State, N89.7 billion. The least was Bayelsa, N48.5 billion. Seven states earned between N70 billion and N78 billion as Statutory allocation. The states are: Kaduna, Katsina, Borno, Oyo, Benue, Niger and Bauchi. Others are in the sixty and fifty billion categories. However, after adding 13% share of derivation, crude oil excess proceeds and VAT, and adjusting for various deductions; the distribution pattern changed completely. Delta (N299.9b), Rivers (N266.2 billion), Bayelsa (N244.3 billion) and Akwa Ibom (N224.2 billion) led other states with incredible wide margin. Going by this analysis, these four states which are also from the South-South geo-political zone could be regarded as the richest. The next after these four was Lagos State which got N116.6b which was just about half the amount for Akwa Ibom and one-third of Delta. Plateau state got the least (N48.1b) total net statutory allocation and it was the only state that had total net to be smaller than total gross.


Table: Total Allocations and Deductions to States
          Between May 1999 and December 2005

S/N ITEM TOTAL
1 Gross Statutory Allocation 2,324,223,659,609.96
2 13% Share of Derivation 799,147,250,362.34
3 External Debt Deductions 143,599,003,700.06
4 Contractual Obligation Deductions 181,662,058,540.90
5 Crude Oil Excess Proceeds 364,050,769,299.25
6 Other Deductions 66,759,783,067.25
7 VAT Allocations 4,793,440,151.10
8 Net Statutory Allocations 3,445,163,077,382.30


 

The net statutory allocation to South-South was about the total of three other zones (say, North-Central, North-East and South-East) put together.


13% Share of Derivation

A total of 799 billion naira was shared mostly among the nine oil producing states (Delta (N203.3b), Rivers (N187.2b), Bayelsa (N183.3b), Akwa Ibom (N144.0b), Ondo (N33.0b), Imo (N16.6b), Abia (N13.0b), Cross River (N10.6b) and Edo (N7.8b)) as 13% share of derivation. This amount constitutes about one quarter of the total net allocation to all the 36 states. The oil producing states constitute one quarter of the states in the federation. Among all the non oil producing states, Plateau had the highest amount which was just about half a million for a period of 80 months. Surprisingly, Lagos state did not receive a dime as share of derivation for the entire period.



Crude Oil Excess Proceeds

A total of N364.0 billion was allocated to the 36 states during this period as crude oil excess proceeds. The leading states are: Delta (N30.9b), Rivers (N29.5b), Bayelsa (N25.2 billion), Akwa Ibom (N25.1 billion) , Ondo (N11.8 billion), Kano (N11.1 billion) and Lagos (N10.5 billion). Other states earned between six and nine billion naira. Ekiti state had the least allocation of N6.0 billion.


VAT Allocation

The total VAT allocated during the period was N4.79 billion with Lagos state alone pocketing N641 million constituting 13% of the total. Next was Rivers (N227 million), Kano (N183 million), Kaduna (N164 million), Delta (N158 million) and Oyo (N146 million). The least was Nassarawa (N88 million) while others earned between N91 million and N140 million.

The South-South zone received 92% of the share of crude oil excess proceeds and 35% of the 13% share of derivation to convincingly lead other zones. Interestingly, the North-West zone earned more (26%) than any other zone from VAT allocation.


External Debt Deduction

Lagos, Abia and Imo states led others in external debt deductions with N10.8 billion, N10.5 billion and N9.0 billion respectively. Other states with high deductions were: Enugu (N6 billion), Edo (N6 billion), Adamawa (N5 billion), and Benue (N5 billion). The state with the least external debt deduction was Katsina (N1.1 billion).



Contractual Obligation Deduction

Out of a total of N181 billion deductions from states’ allocations in respect of contractual obligations, Delta state had N27.9 billion (15%), Rivers N23.7 billion (13%), Bayelsa N15.6 billion (8%) and Akwa Ibom N14.1 (7%).


The South-South zone had the highest deduction in respect of contractual obligation while South-East had more in external debt deductions. In the case of “other deductions”, the North-Central clearly led other zones.



Conclusion

This article is better concluded by posing some important questions that emanated from the study. Where did all the monies allocated to the South-South zone go into? Is there any basis for any agitation from this zone? Is the problem of this zone more of allocation than shrewd management? Why is South-East synonymous with external debt? What economic projects are these debts meant for? What is the basis for sharing VAT? Perhaps, there are other questions which are not apparent to me but I hope someone somewhere will attempt to resolve them.




Join Nigerian Social Network


Copyright © 2010 nigerian-newspaper.com All Rights Reserved.
Privacy Policy | Contact Us | Sitemap | User Agreement  |  Link to Us | African Art | Enlarged Prostate |
High Speed Cable Internet
Check Cash Advance |
Philippine Newspapers | Reverse Phone Number Search | Ohio Newspapers | Google Sitemap | Associated Sites