RipplesMetrics: FAAC allocation to local governments can solve four major problems in Nigeria

For more than a year, especially since the start of the new administration by the federal and state governments in May 2023, questions have been raised about how each level of government spends the allocations disbursed to them every month.

The Federal Account Allocation Committee (FAAC) is responsible for reviewing and adopting allocations of funds to the states of the Federation.

Revenues derived from crude oil, taxes, and other official revenues are divided according to a sharing formula that allocates 52.68 percent to the federal government, 26.72 percent to the states, and 20.60 percent to local governments.

Since the removal of fuel subsidies, allocations to all three tiers of government have increased substantially. For example, Ripple Metrics reports that a total of N3.53 trillion was disbursed to 36 states and the Federal Capital Territory in 2023.

However, if we look at the data further, it can be seen that the allocation of around Rp785 billion in the first quarter of 2023 increased in the following quarter after the removal of fuel subsidies. For the second and third quarters, Rp882.76 billion and Rp996.66 billion were distributed. Meanwhile, Rp946.49 billion was allocated in the last quarter of 2023.

This allocation also increases in 2024 with a total of Rp12.45 trillion distributed to federal, state and local governments between January and June 2024.

Recently, a ruling by the Supreme Court granted financial autonomy to the country’s 774 local government councils, as it ruled that it was unconstitutional for state governors to withhold funds allocated to local governments, paving the way for the councils to manage their finances and make independent decisions on their spending.

Ripples Metric reported that between June 2023 and May 2024, a total of N3.05 trillion was disbursed to 774 local governments as FAAC allocation. This means that the average allocation received by local governments each month was N254.51 billion for the period under review.

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But in this report, RippleMetrics takes a closer look at Nigeria’s pressing challenges and conducts a thought experiment: what if the funds allocated to one level of government were redirected to address these key issues? By comparing the two, we explore the potential impact of reallocating resources to address Nigeria’s most pressing issues.

Some of these challenges include access to electricity, health care, education and a good water supply.

The Energy Progress Report released in 2022 stated that Nigeria has the lowest access to electricity globally, with about 92 million of the country’s 200 million people lacking access to electricity. On healthcare, a report released by The ONE Campaign revealed that healthcare systems in 18 Nigerian states are weak, resulting in poor healthcare delivery, especially in public facilities.

On education, UNICEF data states that one in five out-of-school children in the world is in Nigeria, while about 67 percent of Nigerians have access to basic drinking water supply services.

What can such allocation do?

For example, the total allocation disbursed to local governments alone between January and June 2024 was N1.98 trillion, according to a report by the Nigerian Bureau of Statistics. Using the allocation from the Nigerian budget as a benchmark, Ripple Metrics hypothesized that this allocation to local governments was diverted to address the country’s challenging issues.

At a cost rate of N10 million for 21,500 kva/11/0.400 kv with a network length of 11 km, the allocation to LGAs can provide over 19,000 transformers in various communities in Nigeria enhancing their electricity supply opportunities.

For health care, at the standard of N500 million as outlined by the World Health Organization (WHO) for the establishment of an averagely equipped primary health care center facility, the allocation could provide over 3900 PHCs in Nigeria to improve health care.

Similarly, at a cost of N60 million for the construction of school classrooms, the allocation could provide over 33,000 classrooms for students across Nigeria. While at a unit cost of N18 million for motorized boreholes, the allocation could provide over 110,000 boreholes in communities with poor access to water supply.

By: James Odunayo

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