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13 percent derivation: Wike’s revelation stirs controversy in Niger Delta States

Published

2 years ago

November 29, 2022

The dust raised by Governor Nyesom Wike’s revelation on the payment of 13% derivation fund arrears by the federal government to Niger Delta States is yet to settle..

Governor Wike of Rivers State had over a week ago, during a project commissioning, revealed that President Muhammadu Buhari had paid the arrears of 13% derivation fund owed since 1999 to all the Niger Delta States.

The revelation, which some perceived as politically motivated, had generated a lot of reactions from members of the public across the Niger Delta States, including Akwa Ibom.

Some benefiting States, such as Delta, Edo and Bayelsa immediately came out to explain the amount gotten from FG and how it was expended.

Delta State claimed that it had only received the sum of N14.7 billion as refund from the 13 percent oil derivation in three quarterly instalments of N4.9 billion each.

It added that the actual shortfall due to the state was N250 billion, which the Federal Government agreed to pay in quarterly instalments for a period of five years.

“Senator (Dr) Ifeanyi Okowa said he would not want to leave the next administration with a huge debt burden. He resorted to discounting only N150 billion out of the N240 billion expected receivables but later pruned it down to N100 billion,” The state noted.

Similarly, Edo State said it received N2.1bn refund out of N28 billion expected, which was paid in three instalments of N700 million per quarter.

However, the delay by the Akwa Ibom State government to come out with the amount of monies received as arrears and how it was expended gave room to speculations and brandishing of figures from different quarters.

Firstly, the governorship candidate of the Young Progressives Party, YPP, in Akwa Ibom State, Senator Bassey Akpan during a ward campaign tour alleged that governor Udom Emmanuel had received a sum of $1.1 billion (N600 billion), outside the normal Federal Allocation, regretting that nothing could be shown for that in the State.

“Governor Udom Emmanuel has received $1.1 billion (N600 billion) He has received over N3 trillion. But there is nothing to show for it,” he stated.

Also, the former aide to President Mohammadu Buhari on Niger Delta Affairs and governorship candidate of the All Progressives Congress, APC, in the State, Senator Ita Enang alleged that the six governors in the region misappropriated N950 billion that accrued to their States as proceeds of excess crude oil sales and 13% derivation and urged the House of Assemblies of the respective States to commence investigations and impeachment process of the governors who may be found culpable.

Enang said the governors short-changed their people through low rate discounting at various banks

Enang said that while Akwa Ibom State had collected a total sum of N133.5 billion, it had an outstanding of N277 billion to collect but had already discounted the fund at low rate in banks for ridiculous loans.

Enang claimed that Rivers State Government has collected N116 billion from the arrears of oil monies and N229 billion as outstanding, while Delta State collected a total of N125 billion but had an outstanding balance of N253 billion. Similarly, Bayelsa State has collected N104 billion and has an outstanding balance of N209 billion, which is also being discounted by the State Governor for ridiculous loans.

According to him, Edo State has collected the sum of N13 billion so far and has N37 billion outstanding payment which is also being discounted through loans in some banks.

Also, a non-governmental organisation working to promote economic and financial transparency in the Niger Delta, Policy Alert expressed reservations over the delay by the State government to address the burning issue, asking it to come out clear on the amount received as the 13% derivation and separate it from the loans they have received tagged, “Credit Substitute.”

The Executive Director of the organisation, Tijah Bolton-Akpan in a press conference in Uyo over the weekend, recalled how the organisation issued a statement on November 1, though countered by the State government on how it had received N171.2 billion under the subhead “13 percent Derivation Revenue arrears during the third quarter of 2021.”

Akpan said that the organisation had traced the refund to October 2020, saying “from FAAC Reports for October through December 2020, N71bn was paid to all the Oil Producing States as Refund. What Akwa Ibom State recorded to have received is N2.4bn as “Refunds, Donations and Other Exceptional Income” we recall that there were donations from Federal Government, individuals and Organisations during this fiscal year due to COVID-19 outbreak. Thus, we question this receipt.

“In 2021, a total of N287.04bn was received as refund for the entire Oil Producing States. In 2022, between January and July, N181.68bn was received for the entire Oil Producing States.

“The report notes that in the 3rd Quarter of 2021, the State Government got N171.24bn and in the 4th Quarter of 2021 it received N12.81bn, coming to N184.04bn in 2021 alone.

“It appears that within the 2021 fiscal year, the State Government had acquired loans that were never heard about, and our suspicion is that the government went into ad hoc financing arrangements with commercial banks through the so-called Direct Credit Substitute form.

“In the 2021 financial statements, these loans amount to N35.92bn. But looking at the total Financial Charges for the year (interest on Internal Bank Loans) which amounted to N16.01bn brings the loans to a total of N51.93bn. When you add N135.61bn reported in the financial statements with N51.93 it gives N187.54 which is close to the N184.04bn reported earlier in the 2021 full year Budget Performance Report.”

He also highlighted some loans (which amounted to N35.92billion) taken by the State government to include: Polaris Bank – Akwa GIS loan – N500m, Zenith – Flashpoint Loan – N700m; Polaris – Dakkada Global Oil Palm loan – N500m; Zenith – Akwa Savings Loan – N1.5bn, Zenith Bank – UBE Loan -N715.07m, Globus Bank VKS Loan – N5bn Zenith – AKIRS Crystalised Loan – N24bn, FGN Bridging Facility -N3bn.

Akpan added, “you can also recall that in our infographics, we noted that in 2022, 1st, 2nd and 3rd Quarters, the State Government received N83.26bn as refund tagged as extraordinary items. How do we know that this relates to the refund?

“In the 2022 budget speech, the Governor noted that for capital receipts expected in 2022, Other Exceptional Income will be N15bn while Direct Credit Substitute/Receivable Discounting Facility will be N60bn. This amounted to N75bn. Checks into the 2022 Revised Budget shows these two revenue sources were joined together to call ‘Extraordinary Items’.”

He said from available records it would be deduced that the government is receiving the 13 percent derivation refund and also using the cover of these refunds to get loans through what it calls Direct Credit Substitute/Receivable Discounting Facility.

The organisation, therefore, called on the Akwa Ibom State House of Assembly to hold an investigative hearing on the issue.

In a reaction while addressing a press conference in Uyo, on Monday, the State commissioner for finance, Dr Linus Nkan urged the people to ignore those brandishing figures on social media on the 13% derivation refund, saying that the figures were mere fiction.

Nkan said the State government had received a total of N186bn in tranches of N160bn, while N41,434bn was projected for 2022, out of which N26bn as at third quarter of 2022 had been received.

He added that with the implementation of the International Public Sector Accounting System (IPSAS) it is impossible for any unaccounted expenditure to occur.

According to him “It has become pertinent to respond to issues relating to the refund of the 13 percent derivation arrears to oil producing States, of which Akwa Ibom is one.

“The agitation for the refund of the arrears which were deducted from the earnings due to the Oil bearing States was undertaken by the affected Governors, directly and through their officers at the Federation Accounts Allocation Committee which agreed with the very detailed submission and calculated the sums accruing to the States.

“However, due to the large amount involved and the inability of the Federal Government to pay all at once, it was agreed that the payments be made in tranches quarterly, over a period of five years.

“In 2021, the sum of 160,000,000,000 was remitted to the State account. In 2022, the projected income from this source was 41,434,000,000, but as at Q3, the sum of 26,000,000,000 has been received.

“In line with proper financial records keeping and public finance transparency, the refund was reflected in the 2021 budget as “Other Exceptional income: 13% derivation revenue arrears, which was revised to the tune of 193,000,000,000; in 2022 the revised provision was 41,434,000,000; in the 2023 budget, the estimate for this line item is 100,000,000,000. A simple calculation of these figures will reveal the sustainability thinking disposition that guides the governance of our State.

“We, therefore, urge the entire public to ignore the various figures bandied around on various media platforms, as those are nothing more than fiction.

“This is the reason why knowledgeable stakeholders in the national public finance space have greatly commended the Government of our State under Governor Udom Emmanuel for deepening financial transparency in the financial administration of the State.”

Nkan said that the report of judicious application of the income and other incomes to the State “are captured in the statutory Accountant General’s audited report for 2021 and same will be reflected this year,” adding that there is no cause for the “activation of alarmist tendencies on the State of finances of the State, because the Governor is conscious of the judgement of history and posterity and is doing everything to earn a copious mention on its golden pages”.