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Subsidy removal pushes federal allocation to N10.14tn in 2023, says NEITI

NEITI Report Highlights Fiscal Impact of Policy Shift on Federation Account Allocations

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The removal of subsidy on Premium Motor Spirit (PMS), commonly known as petrol, has contributed to a significant increase in Nigeria’s statutory revenue allocations, reaching N10.14 trillion in 2023.

Released on Tuesday by the Nigeria Extractive Industries Transparency Initiative (NEITI), the report delves into the Federation Account revenue allocations for the year, revealing a notable surge of N1.93 trillion compared to the previous year’s disbursements.

President Bola Tinubu’s declaration in May 2023 marked the end of fuel subsidy, subsequently implemented by the Nigerian National Petroleum Company Limited (NNPCL). This policy shift led to a sharp rise in petrol prices, with rates soaring from N198/litre to around N500/litre initially and later peaking at N617/litre, impacting the revenue landscape significantly.

NEITI’s Executive Secretary, Dr Ogbonnaya Orji, stressed the importance of transparency in fiscal matters, emphasizing the agency’s commitment to enhancing public understanding and accountability in the management of public finances.

The breakdown of revenue allocations depicts the Federal Government receiving N3.99 trillion, the states obtaining N3.585 trillion, and the 774 Local Government councils sharing N2.56 trillion. This distribution reflects a notable increase compared to the previous year, attributed to improved revenue remittances following the subsidy removal and exchange rate adjustments.

Notably, the report highlights varying increases in allocations across different quarters, with the first quarter witnessing a surge of 33.19 per cent compared to the same period in 2022. While the Federal Government’s share increased by 16.79 per cent, state governments and local councils saw increases of 29.99 per cent and 26.22 per cent, respectively.

The report also sheds light on state-by-state allocations, with oil-producing states such as Delta, Rivers, and Akwa-Ibom topping the list. These states benefited significantly from 13 per cent derivation revenue, surpassing their statutory revenues in some cases.

Additionally, the report touches on debt deductions, highlighting Delta State’s substantial debt burden, while noting an overall reduction attributed to the expanded size of Federation Account allocations.

NEITI’s comprehensive review underscores the complex interplay of policy decisions, revenue streams, and fiscal management practices, providing valuable insights into Nigeria’s economic landscape amidst ongoing reforms.

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