16 September 2013

Nigeria: FAAC - 2013 Budget No Longer Implementable - FG

The federal government on Friday declared that the benchmark revenues estimated in the 2013 budget were over-bloated and no longer realistic to implement as actual revenues have consistently failed to meet the initial estimates.

As a result, the government said it would no longer augment allocations to the three tiers of government: they will henceforth share only the actual collections to the federation account and not what was initially budgeted

Speaking on the botched August 2013 FAAC meeting, the minister of state for finance, Dr Yerima Lawan Ngama, said Friday's deadlocked meeting was cordial but that all the parties decided to henceforth distribute only actual collections and not what has been budgeted.

The minister said while the nation's production of crude oil has appreciated to around 2.4 million barrels, it will take 90 days before the impact of the increase in production is felt in the country.

Ngama said this month's FAAC meeting had to be adjourned so that more money could be sourced to fund the shortfall in the July 2013 allocation. So far, he said, it had taken the committee two months to fund the July shortfall and it is still looking for money to make up the difference.

The Federal Ministry of Finance, he said, has brought its share of the shortfall funding which was shared to the states on Thursday. However, this was not enough as the share of the Nigerian National Petroleum Corporation (NNPC) was still being awaited.

The minister of state for finance assured that the difficulties encountered with the 2013 budget with regards to federation account disbursements will not be experienced in 2014 as plans are also on to work with the National Assembly to come up with a realistic budget benchmark, as both the executive and the legislature have learnt from their lessons in 2013.

For example, N467 billion was the total revenue shared in 2012 whereas in 2013 N623 billion has so far been shared and more is still being expected to be shared, thus forcing the government to always source for funds to make up for the monthly shortfalls constantly experienced this year.

Ngama lamented that, from January 2013 to date, the actual revenue shared by the three tiers of government are "far higher than last year's".

He said, "This year's budget is over-bloated; what we are collecting is far in excess of even what was budgeted for last year, but because the budget this year has been taken to a level that it is not supposed to be, that's why when there is a little hiccup the gap shows."

He said the government was making efforts. "From our own side, we have some non-oil surplus and that of excess crude we have already paid. NNPC also will contribute ... we (Ministry of Finance) we have already paid our own," he said.

The July shortfall, he said, is still being shared but the meeting for August disbursement will hold next week. "The reason we adjourned today is to give more time to make up the difference for July. NNPC is supposed to bring 75 and we are supposed to bring 40," he said.

The federal government is working to set up a committee to harmonize the remittances to the Consolidated Revenue Fund (CRF) account and, if deemed necessary, may recommend amending the Fiscal Responsibility Act.

Ngama noted that "what operates now is fluid and it is not scientific so we can harmonize the remittances of these agencies".

Ngama noted that, based on his suggestion, the federal government has given the go-ahead to set up that committee and find a way forward and even amend the Fiscal Responsibility Act.

The minister of state for finance said they identified three types of agencies of federal government who pay their revenue to the Consolidated Revenue Fund (CRF) that the federal government invested in and they are supposed to render surpluses.

These agencies, he said, "are agencies of government that collect revenue for federal government and take cost of collection and then that revenue is available to the federal government; there are also agencies of government that collect revenue, use the revenue for certain activities that the Act establishing those agencies said they should use that money for; so it is the surplus that remains that they will pass to the federal government and there are also agencies of government that collect revenue, they remit 25 per cent to federal government and use the rest for their activities and the question there is how about if the 75 per cent is too much for them or too little for them?"

Based on these separate remittance operations of different government agencies, Ngama said he made the "suggestion to set up a committee to look at all the laws establishing all the revenue-earning agencies of government and also look at the actual operations of those agencies so that we can come with a framework because we don't know which agency will give 25 per cent and keep the rest. If it suits them to give me 25 per cent and keep the rest, they will opt for that using their money for statutory duties and giving me the surplus and if it suits them to collect revenue for government, collect their cost of collection and give the rest to government they will do that, and for others if it suits them if there is a surplus they will remit to government. If not, then nothing for the federal government."

Right now, Ngama said, some legislators believe that every agency of government should remit everything they collect and then bring their cost of operation to the National Assembly to appropriate as a budget. However this argument by the legislators, he said, has its advantages and disadvantages because there will be no incentives to motivate the revenue-earning agencies to put in their best and earn more for the CRF.

Copyright © 2013 Leadership. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.