The Nigeria Extractive Industry Transparency Initiative (NEITI) has warned the three tiers of government of dwindling revenue in 2020.
The agency gave the warning on Monday in Abuja in the latest edition of its Quarterly Review.
NEITI noted that the twin challenge of covid-19 pandemic and the resultant fall in the price of oil would be serious impact government revenue.
This, the transparency body said would affect FAAC disbursements for the rest of the year.
“In light of the ‘double whammy’ of declining oil demand and oil prices as a result of the COVID-19 pandemic, government revenue would likely continue to fall in subsequent months. As global crude oil prices plummet in the midst of the global oil supply glut arising from lockdown of economic activities in many countries of the world, all tiers of government will struggle to fund their 2020 budgets.”
With FG’s projected revenue 2020 at N8.42 trillion, comprising oil revenue of N2.64 trillion, non-oil revenue of N1.81 trillion, and revenue from other sources of N3.97 trillion, the fall in oil price price further impacts government revenue projection.
“The interesting point to note is that while the share of oil revenue represents the direct revenue, there are also indirect sources of revenue from oil. These include signature bonus and renewals and share of dividend from NLNG. In addition, taxes and customs duties, which are based on economic activities will suffer in the light of the lockdown of the major activity hubs of the country”, the review stated.
The extractive industry watchdog called for innovative and concerted actions on the part of governments at all levels to mitigate the impact of COVID-19, not just on revenues but also on the economy as a whole.
It welcomed the proactive measures already been taken by the federal government such as withdrawal of “$150 million from the Stabilization Fund to supplement FAAC disbursements ; initiating modalities for states to benefit from debt and interest moratorium, the review of this year’s budget to reflect current economic realities and a $3.4 billion facility by the International Monetary Fund (IMF).”
While applauding these proactive interventions by the Federal Government, the publication urged state governments to emulate FG’s initiatives by making necessary adjustments in their revenue and expenditure plans for the year.
“Following the lead of the FG, state governments will also need to revise their budgets and prepare for lower FAAC disbursements. The states might need to rely more on internally generated revenue (IGR) to service their budgets. However, it must be said that IGR depends largely on personal incomes, which will likely fall as the lockdown is prolonged and economic opportunities become scarce” the report stated.
The NEITI Quarterly Review also drew the attention states to the negative impact of the COVID-19 pandemic on their expenditure structure. NEITI stated that “More resources will have to be channeled to the health sector to combat the pandemic. This will result in movement of funds from other sectors hitherto identified as critical in their budgets”.