Lagos Governor Raises Alarm Over Decline In Federal Allocation

Governor Babatunde Fashola of Lagos State, western Nigeria last week Monday painted a very grim situation of Nigeria's financial standing before members of the state House of Assembly in a state of the nation address complaining that the Nigerian National Petroleum Corporation under-remitted the sum of N2.4 trillion to the federation account.

The governor, who was visibly saddened by the situation, gave the impression that no state of the federation would be able to meet its target for the year 2014 as the 36 states are reeling in serious financial constraint.

The fact, according to the governor, is that for the first time in almost 14 years of the nation's democratic experience, the country recorded some walk-outs staged by commissioners of Finance during meetings of the Federal Accounts Allocation Committee in Abuja, the country's capital.

He said the first one happened in 2011, while the country witnessed more of such walkouts last year due to irreconcilable accounts of the federation.

As a result, he said, some states have had, in the recent past, to borrow to keep the government going.
"The reasons for those disagreements were largely reported revenue declines that were disputed by the various states as represented by their various Finance commissioners," he said adding that this pattern had continued right from the second half of last year to January this year.

"The only bleep of stability is the last FAAC meeting in February.  "Now whilst this revenue decline has gone up, we have been unable to hold the National Economic Council, NEC, meeting in Abuja.
"In the past, the meetings had held every month. The meeting has not been held now for, at least, six months in spite of clear revenue declines," he said describing the council as an organ for the discussion of economic issues concerning the 36 states of the country and made of governors, the Governor of the Central Bank, the ministers of National Planning, Finance and others. The meeting is chaired by the Vice President, Namadi Sambo.

He said the revenue decline should have been a major issue for discussion at the NEC meeting since the constitution of the country provided for it.

He reminded the House that he had always complained of decline in revenue and the inability of the state to meet optimal budget performances since sometimes, the government had left social services just to meet welfare needs of personnel.

He said the revenue declines are credited to "what is characterised as uncoordinated and discretionary application of the Federal government's fiscal policy on waiver and negotiating the duty credit certificates."

He said for this reason, the Nigerian Customs Service only generated 47.8 per cent of its 2013 budget as reported to FAAC.

The decline in revenue, he said, was also credited to decline in oil production, which was adduced to pipeline vandalism and crude oil theft. And, of course, the debate on accounting on crude oil is out there.

"There is the issue of a one percent statutory revenue allocation deduction from the states by the Federal Government from October 2013. It is said to be for police reforms." He said he was told that the National Economic Council took the decision but stressed that despite this, he believes that it is an unconstitutional decision.
He said he had written the Federal Government to complain about his opposition to the decision and that the state is heading to the court since he did not receive any reply to his letter. "The Economic Council has no such powers," he said.

Giving further reasons for the decline in revenue, he said complained about the reported under-remittance of funds by the Nigerian National Petroleum Corporation, NNPC as seen from the report of FAAC which was presented to him by the state Commissioner of Finance, Ayo Gbeleyi.

"From the slide which I have here showing remittances on monthly bases to the states, and to the local governments in Lagos, NNPC has clearly refunded monies under item 13, made some refund across the months from February last year.

"So, if NNPC didn't withhold money from the federation accounts, then why is she ( Minister of Finance) making refunds? That is the question that I ask," he said adding that the revenue decline had affected Lagos state's policy and developmental objectives as the severity of this challenge varies from state to state.

Continuing, the governor said, except for the funding of capital projects which the state had done by bonds approved to be raised by the House, the state had not borrowed because the tax payers in the state have demonstrated faith in the government, but he said this may not be the situation in other states of the federation.
He said there are reports that the deductions had been made from the Ecological Fund but lamented that Lagos state was not considered even though it is a coastal state challenged by flooding and a shoreline that extends by over seven kilometres as well as the cry by residents of Goshen Estate and Alfa Beach in the state.

He said he would have been able to call the attention of the government to this anomaly during the National Economic Council meeting, but said it was not possible since no meeting had been held since the last six months.

"Revenues are declining and the exchange rates are declining. Even in the face of the bleep that I mentioned, if the revenues are earned in dollars and converted into a depreciating naira, you could get huge lump sums or so, but get diminished value because of the declining naira in terms of exchange," he said.

March 10, 2014