Lagos — Allocations to the three tiers of government - Federal, State and Local Governments - have continued to slide, but it could have been worse if the Organisation of Petroleum Exporting Countries (OPEC) had agreed to output cuts yesterday, a development that would have further reduced Nigeria's crude oil exports and revenue.

The February dues slumped by N35.54 billion with the sharing of N250.04 billion, as against N285.58 billion distributed the previous month.

But it is still an improvement on the January situation which witnessed a drastically reduced allocation of N285.58 billion, representing a decrease of N149.82 billion or 34.4 per cent, compared with N435.40 billion in December 2008.

The $1.5 billion being an amount taken from the excess crude proceeds account (ECA) as approved last week by the National Economic Council (NEC) was also shared by the three tiers to provide a "stimulus" to cushion the effects of the slide recorded in the allocations in January and February.

The $1.5 billion excess crude proceed is to be converted to naira and shared according to the revenue sharing formula.

These developments came up at the FAAC meeting, which held in Makurdi, Benue State, at the National Council on Finance and Economic Development (NACOFED).

The meeting, chaired by the Minister of State for Finance, Mr. Remi Babalola, was attended by the Accountant General of Federation (AGF), Alhaji Ibrahim Dankwambo, and state Commissioners for Finance and Accountants-General as well as representatives of the Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC).

Others included representatives of Central Bank of Nigeria (CBN), Nigerian National Petroleum Corporation (NNPC), Nigeria Customs Service (NCS), Federal Inland Revenue Service (FIRS), Departments of Petroleum Resources (DPR) and the Debt Management Office (DMO).

Dankwambo explained that the drop of N35.54 billion in allocation to the three tiers of government was as a result of the decline in crude oil prices in the international market and the reduction in production quota of the OPEC, a body which Nigeria belongs to.

According to him, Nigeria 's production quota was cut back to 1,673,000 barrels per day (bpd) in January 2009 from 2,050,000 bpd in December 2008.

"In addition, there was also a complete shut down of Tebidaba Flow Station and subsequent loss of about 30,000 bpd as a result of another attack by militants," he added.

Babalola disclosed at the end of the meeting that the N250.04 billion shared by the three tiers, was made up of N215.86 billion statutory allocation and value added tax (VAT) of N34.18 billion.

"The total amount declared and recommended for distribution is N250.04 billion in addition to the sum of $1.5 billion. The $1.5 billion was proposed for distribution from the Foreign Excess Crude Savings Account to all tiers of government," he noted.

In a communiqué signed by Dankwambo, the Technical Sub-committee of FAAC revealed that N2.77 billion and N1.51 billion were paid to FIRS and NCS, respectively, being four and seven per cent cost of collection.

Out of the statutory allocation of N215.86 billion, the Federal Government received N102.53 billion (about 52.68 per cent), a decline of N12.15 billion when compared with the N114.68 billion it received the preceding month.

The 36 state governments got N52 billion (about 26.72 per cent) from statutory allocation, a drop of N6.17 billion as against the previous month's receipt of N58.17 billion, while the 774 local government councils were allocated N40.09 billion.

The 13 per cent derivation accounted for the balance of N21.24 billion and was re-distributed among the nine oil-producing states of Abia, Akwa Ibom, Bayelsa, Cross River, Delta, Edo, Imo, Ondo and Rivers.

The states received the lion's share of the VAT amounting to N17.09 billion (about 50 per cent), a decrease of N5.03 billion when compared with the preceding month's level of N22.12 billion.

The States were closely followed by the local government councils which received N11.96 billion (about 35 per cent), while the Federal Government's VAT amounted to N5.13 billion.

Yesterday, OPEC agreed to keep production unchanged, but urged its members to fully implement the output reductions announced late last year in order to stabilise the market.

At its 152nd meeting in Vienna, Austria, ministers of OPEC resolved to leave the existing production ceiling for now on concerns for global economy. The members however agreed to remove 800,000 barrels per day, being the remaining of the previous cuts.

Deepening global recession, which eroded world oil-demand had forced the 12 member group, which pumps a third of the world's oil to reduce output by 4.2 mbpd since September last year to prop up prices.

A communiqué issued at the end of yesterday's meeting said after a review of recent oil market developments, along with the Secretariat's supply/demand projections for 2009, the conference expressed concern that the world economy is in the midst of the worst global economic recession in decades, with the world economy forecast to contract by 0.2 per cent in 2009, considerably lower than the forecast in December 2008, and downside risks dominating, especially in the OECD region.

The group also noted that while a necessary condition for economic recovery is a return of confidence in financial markets, and that systemic risks to the financial system have already been reduced, the degree of success of bank bailout plans and fiscal stimulus packages may only become evident later in the year, in addition to which equity markets remain bearish with the potential for further downward movement.

Members further observed with concern the deep impact of the economic downturn on world oil demand, estimated to decline by 1.0 mbpd in 2009 to 84.6 mbpd.

"As a result of this, high stock levels, which are currently at 59 days of forward cover, will persist. At the same time, the Conference noted that non-OPEC supply is forecast to grow by 0.4 mb/d in 2009, to 50.7 mb/d, resulting in a total call on OPEC production during 2009 of 29.1 mb/d, a reduction of 1.8 mb/d over 2008. In this regard, the Conference voiced its hope that the decisions taken by the forthcoming meeting of G-20 in April 2009 may contribute a substantial improvement to the world economy," the conference said.

The group observed that following its decision at the 151st (Extraordinary) meeting in December 2008, to cut 4.2 mbpd from the actual September 2008, with effect from January 1, 2009, compliance for February, according to secondary sources, was 79 per cent, which has contributed to balancing the price of the OPEC Reference Basket at around $40 since the beginning of the year, despite the critical economic outlook.

The group also reiterated its commitment to stabilising the market, ensuring a regular supply of petroleum to consumers at price levels which are equitable not only for the world economy, for consumers but also to ensure adequate future supply.

The ministers, however, resolved to monitor very closely developments in the market and to convene in Vienna, on May 28, 2009, to consider any further actions deemed necessary. The Conference also agreed that its next Ordinary Meeting will be convened in Vienna, on September 9, 2009.

Oil hovers around $40 a barrel from a record high of $147 in July last year. To help revive prices, the organisation had cut outputs twice since September.

Nigeria had benchmarked its oil at $45 a barrel in the 2009 Budget and the current $40 price of the crude is less than $5 above the budget target.

By Chika Amanze-Nwachuku in Lagos and Kunle Aderinokun in Abuja with agency report