The Nigeria Extractive Industries Transparency Initiative, NEITI, says the Federal government revenue generating agencies remitted a total of about ₦14.38 trillion as revenue from the extractive sector to the Federation Account (FA) between January 1, 2020 and December 31, 2021.
The revenue generating agencies include the Nigerian National Petroleum Company Limited, NNPCL, the Nigerian Upstream Regulatory Commission (NUPRC), the Federal Inland Revenue Service, FIRS, the Ministry of Mines and Steel Development, MMSD, and the Nigeria Customs Service, NCS.
A breakdown of the remittances showed that mineral revenue accounted for ₦6.40 trillion (about 44.5% of total remittances) for the period, while other non-mineral revenue (excluding VAT) contributed ₦4.80 trillion (about 33.37% of total remittances).
These information and data are contained in the latest Fiscal Allocation and Statutory Disbursement, FASD, report published by the Nigeria Extractive Industries Transparency Initiative, NEITI, which covered the period 2020-2021.
Executive Secretary of NEITI, Orji Ogbonnaya Orji while presenting the highlights of the report stated that the information and data contained in the NEITI latest FASD reports reviewed processes that characterized all transactions within the sector. It looked at independent assessment of financial transactions in the areas of revenue receipts and payments and how the processes weighed on the scale of transparency and accountability in the oil and gas sector during the period under review. Other areas that NEITI focused on, in this report, were projects executed, deployment to capital projects and recurrent expenditure and how these aligned with the core responsibilities of the agencies, the government and citizens expectations.
NEITI’s FASD Report examined total extractive industries revenue remitted to the Federation Account, tracked allocation and disbursement from the account to statutory recipients as well as utilization and application of the funds by beneficiaries between the years 2020 to 2021.
The audit covered four federal revenue generating and 11 beneficiary agencies that are involved in the management of extractive industries funds. It also covered nine selected states: Akwa-Ibom; Bayelsa; Delta; Gombe; Imo; Kano; Nasarawa; Ondo and Rivers states.
The beneficiary agencies include: Tertiary Education Trust Fund (TETFund); Petroleum Technology Development Fund, PTDF; Niger Delta Development Commission (NDDC); Nigerian Content Development and Monitoring Board, NCDMB; Nigeria Midstream and Downstream Petroleum Resources Agency, NMDPRA, – PEF Nigeria Midstream and Downstream Petroleum Resources Agency, NMDPRA – PPPRA. Others are: Nigeria Sovereign Investment Authority, NSIA; Development of Natural Resources Fund , DNRF; Stabilisation Fund; Ecological Fund; Excess Crude Account, ECA.
The report, which is the fourth in the audit cycle, revealed that overall remittances to the Federation Account for the period increased by about 14%.
The Auditor General of the Federation, Shaakaa Chira represented by the Director of Audits Sundung Eldad James stated that the FASD report is useful to the office of the Auditor General and it is also in fulfillment of the Agency’s mandate as enshrined in the Constitution of Nigeria.
He stated that the report will further assist his office when performing the Audit of the federation revenue, its collection, remittance, and disbursement process. Also it will aid periodic checks of deductions and transfers made before remittances and the FAAC Allocations” Eldad affirmed.
In his goodwill, Nigerian Midstream and Downstream Petroleum Regulations Authority, NMDPRA, Chief Executive Officer, Faruk Ahmed represented by the Director Operations, Oseni Mukaila Adewale stated that the role being played by NEITI over the years include transparency in public and private sector businesses and even beyond the extractive industries. NEITI’s demand for accountability from stakeholders has increased sense of responsibility among agencies and government institutions towards enhancing revenue and maximum value for Nigerian people.
“Today marks an epoch-making event, being that the vital information, data and crucial facts to be unveiled will provide opportunity for hind-sight so that we can have a better foresight on our national revenue profile, disbursement and utilization with implications for consolidation, improvement or possible review”. Oseni explained.
The Executive Director, African Centre for Leadership, Strategy and Development (Centre LSD) and the global representative of the Publish What You Pay, PWYP, Monday Osasah who gave a goodwill message on behalf of the civil society organisations stated that NEITI has simplified the work of the civil society. He charged the CSOs to use the information provided by NEITI as a tool for advocacy.
The report was compiled by an Independent Administrator, Amedu Onekpe & Co., on behalf of the National Stakeholder Working Group, NSWG, otherwise called NEITI Board, in accordance with the NEITI Act, 2007 and the EITI Standard.
Other findings of the report are highlighted as follows:
Out of a total Mineral Revenue of N6.40 trillion, the report said the DPR now NUPRC accounted for the highest contribution of about N2.71 trillion, or 18.83% of the total remittances, followed by FIRS with N2.13trillion, or 14.81%, and NNPC with N1.55 trillion, or 10.8%, while the least contribution was from the Solid Mineral with N13.33 billion, or 0.09%.
The report revealed that the contribution by the NNPC declined significantly by 56%, along with the FIRS, whose contribution also dropped by 10%. The decrease in the revenue remittances by both the NNPC and FIRS was attributed to the decrease in revenue generated from crude oil exports in 2021.
Similarly, non-mineral revenue of about N4.80 trillion (or 33.37% of total remittances, increased by N3.86 billion from 2020 to 2021, with the highest contribution of N2.69 trillion, or 18.71% coming from the Company Income Tax (CIT), followed with N2.025 trillion, or 14.08% from the Nigeria Customs Service (NCS) and N85.25 billion, or 0.59% from other tax sources.
While the revenue from CIT in 2021 declined by 5.25% from 2020, the report said the revenue realized by the NCS in 2021 increased by 40.55%, while other taxes significantly recovered from a deficit in 2020 to a positive balance in 2021.
However, the report said the remittances from royalty and other fee payments from the DPR and MMSD (solid minerals) increased significantly by 84% and 43% respectively for the corresponding years.
Receipts from VAT, which increased significantly for the two years period, resulted in the remittance of about ₦3.18 trillion (or 22.1% of total remittances to the Federation Account, while the revenue generated by the NCS increased by 41% during the period under review.
Federal Government States and Local Government shared ₦5.42 trillion Mineral Revenue.
In terms of disbursements to the three tiers of government, the report showed that while a total of about ₦5.42 trillion was distributed to the Federal, State and Local Governments for the period, a total of ₦859.66 billion was deducted as 13% derivation and shared among the nine oil producing states after the deduction of excess petroleum profit tax (PPT) and Royalty.
The nine oil-producing states include Abia, Akwa-Ibom, Anambra, Bayelsa, Delta, Edo, Imo, Ondo, and Rivers.
A breakdown of the disbursements showed that while the Federal Government received about ₦2.80 trillion, the 36 state governments got ₦1.45 trillion, and the 774 Local Government Areas received a total of ₦1.17 trillion.
The report noted 2021 as the year with the highest revenue distribution across board, with 2% increase between 2020 and 2021.
On a state-by-state basis, the report showed that the gross statutory revenue and VAT to the states from 2020 and 2021 was about N4.65 trillion, with Delta, Rivers, Akwa Ibom, and Lagos receiving the highest allocations for the period, while Gombe, Ogun, Ekiti, Plateau, Cross River, and Osun were states with the lowest allocations.
Disbursements to States in the six geopolitical zones
In terms of disbursements to States in the six geopolitical zones, the report said the South-South (SS) Zone allocation of N1.37 trillion, or 29.53% of the total revenue, was the highest, as a result of the 13% derivation revenue payment.
The allocations for the other zones, the report said, were: North-West N830.078 billion, or 17.85%; South-West, N677.69 billion or 14.57%; North-Central, N669.226 billion, or 14.39%, and North-East N591.199 billion, or 12.71%, while South-East had the lowest allocation of N509.59 billion, or 10.96% of the total allocation.
Further breakdown of the details of the zonal allocations showed that in the South-South, Delta State received the highest allocation of ₦372.07 billion, followed by Rivers (₦298.68 Billion), and Akwa Ibom (₦281.78 Billion), while Cross River got the least allocation (₦66.83 billion) during the year under review.
In the North-West Zone, Kano State got the highest allocation of ₦163.41 billion, followed by Kaduna (₦130.02 billion), and Katsina State (₦123.09 billion), while Zamfara got the least allocation of ₦84.81billion for the period.
Lagos State received the highest allocation of ₦243.58 billion in the South-West zone for the period under review, followed by Oyo (₦117.93 billion), and Ondo (₦95.98 Billion), while Osun received the least allocation of ₦64.19 billion.
The Federal Capital Territory (FCT) got about ₦112.77 billion as the highest allocation in North-Central Zone, with Borno receiving ₦122.49 billion, as the highest allocation in the North-East Zone, while Imo State got the highest allocation of ₦113.45 billion in the South-East zone for the period under review.
Additional revenues from other sources
In terms of additional revenue from other sources such as exchange gain, excess crude, other non-mineral, solid mineral, and NNPC refunds, the report said a total of N972.705 billion was distributed among the three tiers of government.
A breakdown of the details revealed that while a total of N234.32 billion was shared as Exchange gain, the Federal Government collected N109.89billion; States N55.73billion, and N42.97billion, while N25.72billion was shared as 13% derivation revenue for the period.
Out of a total of N81.097 billion revenue shared as Domestic Excess Naira, the Federal Government got N37.168billion; States N18.85billion, and Local Governments N14.53billion, while N10.54billion was shared as 13% derivation revenue for the period.
From a total excess oil revenue of about N105.257 billion, the report showed that the Federal Government received N55.36 billion; States N28.079 billion, and Local Governments N21.648 billion, while N167.94 million was shared as 13% derivation revenue for the period.
The Federal Government received about N126.67 billion out of the total N240.45 billion shared as non-oil Excess Revenue for the period, while the States got N64.25 billion, and Local Governments N49.53 billion.
Out of a total of N16.83billion realized as Solid Mineral revenue, the Federal Government received N7.712 billion; State Governments N3.911 billion, N3.016 billion went to the Local Governments, while N2.1 billion was shared as 13% Derivation revenue.
In terms of FOREX Equalization revenue shared, the Federal Government got N21.083billion out of a total of N46.00 billion, with the State Governments getting N10.69 billion, Local Governments N8,244 billion, while N5.98 billion was shared as 13% Derivation revenue.
From a total of N244 billion shared from FGN Intervention revenue, the report said the Federal Government received N118.68 billion, State Governments N60.19 billion, Local Governments N46.41 billion, while N18.72 billion was shared as 13% Derivation revenue.
In terms of Excess Bank Charges, out of a total of N4.75billion shared, the Federal Government took N2.50 billion, State Governments N1.27 billion, and Local Governments N978.85 million.
Revenue from Ministry of Mines and Steel Development
An analysis of revenue by State shows that seven out of the 36 states of the federation including the Federal Capital Territory (FCT) contributed 57.90% (₦7,741 billion) of the total revenue generated by the MMSD which is over half of the total revenue for the period under review.
The contributing states, including Ogun, Kogi, FCT, Lagos, Ebonyi, Edo, and Cross River State, each provided no less than 5% of the total revenue. Ogun and Kogi State led in contributions, accounting for 12.76% and 12.29% of the total revenue respectively, the only states surpassing the 10% threshold during the reviewed period. These significant contributions are attributed to the presence of major operators like Dangote, BUA, Lafarge, and Julius Berger in these states.
Enugu State often referred to as the ‘Coal city’ and known for its large coal deposit (one of Nigeria’s strategic minerals) contributed less than 1% to the total revenue.
NEITI report outlined salient observations and made far-reaching recommendations which they listed to include: to enhance financial transparency; the government should implement measures to ensure that NNPC stops the recovery of expenses before remittance to FAAC. This will enhance financial transparency and accountability in NNPC’s operations with the federation.
While the cessation of the subsidy regime has helped to block revenue leakages and improve government revenue, alternative mechanisms for supporting vulnerable citizens and mitigating price fluctuations should be explored.
So also to address the significant cost to the federation, the government should commission an independent consultant to conduct a comprehensive review and audit of the NNPCL’s deductions. This will enhance accountability and identify areas for potential improvement or cost-saving measures.
On the need to review remittance mechanism, the report recommend that NNPC’s returns from the sales of domestic crude allocated for refineries should be revised to be made in foreign currency instead of in naira. This adjustment will optimize the value of returns and better align them with international trade practices. Remittance to the federation account is a function of revenue hence, the NUPRC should ensure that there is robust system in place for blocking revenue leakages.
We highly recommend full utilization of the e-recording and e-archiving options for easy access to data.
Others are government should develop and implement strategies that will help drive investments (both local and foreign) to the mining sector and improve revenue generation. Efforts should be placed on developing high prospect minerals that can result in significant revenue generation and economic development. In addition, there should be a collaboration between all tiers of government to fight illegal mining operations that results in huge revenue losses.
Soa also the MMSD should engage with key stakeholders to develop a fiscal regime for the mining sector that ensures revenue transparency and help track revenues from all mining operations, including taxes.
The publication of FASD report is in fulfillment of the Nigeria’s obligation to the global Extractive Industries Transparency Initiative (EITI) and in compliance with the provisions of the NEITI Act 2007.
“NEITI encourages Nigerians especially the civil society and the media to use the information contained in the report for advocacy and accountability purposes to ensure prudent use and management of Nigeria’s extractive revenues and bring about sustainable development. More details on the findings and recommendations are contained in the FASD report. The report can be accessed and downloaded on the NEITI website www.neiti.gov.ng.”