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The monthly federation allocation for the month ended, January, to local, states and federal government has been greatly affected by the non passage of the 2009 as well as the drop in oil price.

A total of N285.58 billion was distributed among the three tiers of government for the month of January as against N435.40 billion distributed in the previous month of December.
This shows a decrease of N149.82 billion.

According to the Accountant General of the Federation, Ibrahim Dankwanbo, the decrease aside the delay in budget passage and the falling oil price , was attributed to the decrease in production quota as well as production shut-in at Tebidaba flow station as a result of militants and pirates activities.

The oil price drop was said to be in average of $14.74 per barrel. The price collapsed since July 2008, going against market fundamentals. This as a result has weakened the economy.

With oil prices far below half what they were last year, the country’s OPEC quota was reduced to 1.88million barrel per day, mbpd.
The proposed N2.87 trillion 2009 budget has been faulted as deficit, while the House of representatives has since raised it to N3.084 trillion.

In his remarks at the Federation Accounts Allocations Committee, FAAC, meeting recently held in Abuja, the Minister of State for Finance, Mr Remi Babalola, noted that even in the face of the decrease in revenue generated, FAAC decided not to touch the Excess Crude Account.

While he assured that the country’s $45 per barrel is still appropriate in the lean oil production period when compared to Russia $95, Colombia $80, Mexico $70 and Qatar $55.

“Prudent management is essential now than never. It is no longer news that the salaries of all political appointees at the federal level will be reduced substantially as policy response while several overheads has been eliminated from the books of the federal government this financial year. This is one of the true tests of leadership we have to contend with at this time”.

Continuing he said, “It will be right if we concentrate our efforts into modernizing our economy, to make it strong and flexible enough to meet future challenges, to create the right environment for business to flourish and to deliver better conditions of living to the working families of our nation.

“It is through this endeavor that we will be able to reduce dependence on the dwindling monthly federation Account inflows for survival. Economic depression cannot be cured by legislative action or executive pronouncement. Economic wounds must be heated by action of the cells of the economic body”.

The minister also informed that the month’s revenue shortfall will be managed by expenditure reduction, non-oil revenue enhancement and tolerable fiscal/deficit borrowing with jeopardizing macroeconomic stability.

A total amount recommended for distribution for the month of January was N285.58 billion.

Federal government received N114.68 billion which is 52.68%. State governments received N58.17 which is 26.72% and local government received N44.84 billion representing 20.60%.
Mineral revenue generated for the month was N181.85 billion; non-mineral revenue was N62.69 billion while valued Added Tax was N44.25 billion.