Managing the ‘increase’ in FAAC allocation

recently, the chairman of the Joint Tax Board (JTB) and Executive Chairman, Federal Inland Revenue Service (FIRS), Mr Tunde Fowler, was really excited when he recalled how the Federal Government raised the over N500 billion allocated by the Federal Accounts Allocation Committee (FAAC) in June. According to him, it was the first time in 2016 that the Federal Government had shared out such an amount of money among the three tiers of the government.

Of the amount, 70 percent was from the non-oil sector while 30 percent was from oil sources, a situation which prompted an optimistic exclamation from the excited chairman as he led the 36 chairmen of the state Boards of Internal Revenue (SBIRs) to the Ogun State governor’s office in Abeokuta. Fowler said: “We are proud of the development and we tell ourselves that this is the time to fund the budget of the Federal Government from non-oil sources.”

To be sure, nothing can be more exhilarating than for the  federal budget to be funded from non-oil sources. But we wish we could share in Fowler’s infectious optimism that caused the Ogun State governor, Senator Ibikunle Amosun, to say while declaring open the 135th meeting of the JTB: “Whatever you, Customs and others did last month that ensured that we (federal, state and local councils) shared over N500 billion at FAAC, please continue to do it. It is good for the Federal Government, it is good for the states, and it is good for the local councils. It is good for the nation.”

However, without any increased activity in the productive sector of the economy, it is easy to see  that the increased revenue was not the result of actual earnings from increased production in the real sector of the economy but from exchange rate gain. Thus, we do not see any reason to cheer the so-called increase from an economy which even the government has declared to be in recession. Rather disturbingly, the Federal Government’s expenditure in the first quarter of 2016 was more than what it was in 2015 in spite of reduced earnings. We think the government should be concerned with cutting costs instead of jubilating over nominal increase in the shared revenue.

The excitement which enveloped the JTB, a forum of financial and tax wizards, should scare observers of the country’s economy. They are quite aware that the increased revenue did not signal any improvement in the economy and the quality of life of the citizenry. It ought to be clear to the members of the JTB that since production has not increased in any meaningful way, whatever was up for sharing amongst the three tiers of government could not have been real.

The government should not take this excitement as a reason to return to the vomit of profligate spending. We are worried for instance that the recession in the economy has yet to be reflected in the activities of the state governors. Their extravagant attitude and immensely wasteful convoys and lifestyles that they cannot afford in their private lives have not been shelved. The increase in revenue is at the expense of the citizenry who these public office holders appear unwilling to spare a kind thought for and the excitement affected by the JTB may spur a chain of wrong dispositions to official spending if serious restraint is not ensured. We believe that the government should take steps to ignite the productive sector and make earnings real.

That way, the increase will be felt throughout the social strata because of its reverberating effects on employment and the earning power of the people. That is the time that Fowler’s self adulation and Amosun’s excitement will be truly justified.