Nigeria: State govts may go broke in June

State governments in this country may not be able to pay workers’ salaries in the next two months when the $3.2 billion currently left in the Excess Crude Account is shared out, a top official of the Revenue Mobilisation, Allocation and Fiscal Commission [RMAFC] told Daily Trust in Abuja yesterday. 

The sources said only Lagos State will be able to pay salaries if the funds from the Federation Account and Excess Crude Account further nosedive in June. 

Lagos State has an Internally Generated Revenue profile of N17.5 billion, while it paid monthly salaries of N3 billion in 2009. Other states depend largely on monies from the federation account and the excess funds from the proceeds of oil sales. 

For the 2009 fiscal year, the anticipated internally generated revenue for Borno State was N17.843 billion and the personnel costs stood at N 8.678 billion for the year. Daily Trust could not confirm how much Borno State raked in as internally generated revenue for the year. 

But our reporter in Borno said the state may not face serious financial difficulties because it has made provision for the rainy day. 

The dwindling revenue profile of the government will also affect civil servants at the federal level, a top federal civil servant also said. 

Monthly revenue accruing to the federal, state and local governments has been on the decline since January this year. The three tiers of government shared N333 billion in January and N273 billion in February.

The allocation for the month of March is not yet out but a source at the Federation Account Committee said Nigerians should expect lower postings to states for the month. The depletion of the Excess Crude Account came on top of continuous downward trends in funds accruable to the Federation Account. The excess crude account was created by the Olusegun Obasanjo government when the prices of crude oil in the international market were far above Nigeria’s budget benchmark. The Excess Crude Account is divided into two parts. There is the dollar part which comes from the sales of crude oil outside the shores of Nigeria by the NNPC. The other part comes from Domestic Excess Crude Sales. 

Nigeria’s deepening financial crisis is further captured in the envisaged 35 per cent or N1.5 trillion budget deficit for 2010. 

The 2010 budget is predicated on oil production of 2.88 million barrel per day at $67 per barrel. This is against last year’s $57 a drum. The price of sweet crude at the international market yesterday stood at $87 a barrel. Most states depend on the funds from the federal government to pay their workers and to carry out major projects.

Government has been augmenting revenue shortfalls by withdrawing from the Excess Crude Account. The account is now down to about $3 billion from a balance of $20 billion in January 2009.

In February 2009, the Federation Account Allocation Committee recommended the sharing of $2 billion after the state governors pressurized the federal government to share $4 billion from the account. In April 2009, $5.3 billion was withdrawn from the Excess Crude Account to fund the federal government’s power project. Between June and August 2009, $4 billion was shared by the governments, after the state governors went to court praying that the whole Excess Crude fund be shared. 

Another $2 billion was shared by the government in the heat of global economic crisis that drastically reduced international oil prices last year. Towards the end of 2009, federal government withdrew $2 billion from the account and injected it into the economy as economic stimulus. 

In the same vein, Daily Trust has also learnt that since January, in an unprecedented manner, the Federal Government has been dipping its hands into oil proceeds to offset  Joint Venture Cash Calls. Nigeria has 60 percent joint holding and 40 percent to the multinationals in the JVCs. 

Corroborating this fact, Central Bank of Nigeria [CBN] Governor Sanusi Lamido Sanusi and former minister of finance Ngozi Okonjo Iweala recently said budget 2010 is not realistic.

Meanwhile, a top government official said unless the states aggressively embark on harnessing their internally generated revenue and relying less on revenue from the federation account, they may also not be able to execute any capital project for the rest of the year. 

How revenue from the Federation Account and the Excess Crude Account were shared by the Federal Government, 36 States and the 774 Local Government Councils. 

Federation Account (N)    Excess Crude Account ($) 

September ‘09:                  N351 billion    The account had a balance of $20 billion as at January 2009. 

October’09      :  N354 billion    $2 billion was shared in February 2009 

November’09 :  N374 billion    $5.3 billion was withdrew for power emergency fund in April 2009

December ‘09:   N370 billion    $4 billion was shared between June and August 2009. Another $2 billion was shared in the heat of global economic meltdown in 2009 

January 2010:    N330 billion    In October 2009, another $2 billion was withdrew as economic stimulus package approved by NEC

February 2010:  N273 billion    In March alone this year, $3 billion was shared by the federal states and local governments