Revenue allocation to federal, state and local governments has declined from a peak of N970.57bn in July 2021 to N680.783bn in May 2022. This representing a 30 per cent reduction over the period. The decrease in allocation to these levels of government reveals the fiscal challenges facing various levels of government in Africa’s biggest economy.
Nigeria earns its biggest revenue from crude oil, but it has paid N2.1tn in the first six months of the year. And could pay another N4tn by the end of the year, according to the International Monetary Fund estimates. The opaque and fraudulent subsidy regime has made it nearly impossible for the Nigerian National Petroleum Corporation to make remittances to the government consistently.
The Federal Government has raised its budgetary allocation of N443 billion for gasoline subsidy to N4 trillion and has received approval from the National Assembly.
The situation is worse declining oil production and theft. Oil production fell to 1.2 million barrels per day in April 2022 from 1.238 million barrels in March, according to OPEC Monthly Oil Market Report. This is far from the oil benchmark of 1.88 million barrels per day in the 2022 budget.
Printing of currency in the face of inflation, arbitrary tax cuts and high food prices. Due to reduction in food production and ban on chemical fertilizers are also seen as culprits. But these are similar to Nigeria. Nigeria faces high inflation, debt is over N40 trillion and its Eurobonds are nearing a junk status. With investors demanding high-interest rates due to a perceived high-risk status
