Reports of the discovery of the Omicron variant of COVID-19, which stormed the world within the last one week, is already impacting negatively on the global stock markets and the price of crude oil at the International market. From an average $85 per barrel, crude oil price dropped under 72 hours to about $70 per barrel, with reports that Nigeria’s Bonny Light, shrink further to $69.8 per barrel as at Wednesday December 1.

Surprisingly, economic watchers, analysts and people in government at the Sub-National level, particularly the crude oil producing states, appear indifferent to the sharp decline in the price of crude oil, occasioned by the OMICRON variant of COVID-19. This is even more worrisome, against the backdrop of the fact that the crude oil producing states, rely heavily on allocation from the Federation account, particularly 13% derivation. We must also not forget the fact that the proposed 2022 budget of the Federal Government, is hovering between $57 and $60 per barrel as the crude benchmark and if the drop in the price of crude oil at the International market continues in the negative trajectory, then Nigeria, with emphasis on the crude oil producing states, should brace up for tough times ahead.

Available statistics, show that there has been consistent plummet in the derivation revenue accruing to crude oil producing states from the Federation account, between August 2021 and October 2021.

Figures released by the Federal Accounts Allocation Committee, FAAC, revealed that oil producing states in Nigeria, received N41.376 billion as derivation (13 per cent of Mineral Revenue) for the month of August 2021, N28.984 billion for September 2021 and N21.498 billion as derivation money for the month of October 2021, showing a steady decline in revenue allocated to the crude oil producing states, from the Federation account.

A statement released Wednesday November 17, by the Acting Director, Information, Ministry of Finance, Budget and National Planning, Mr. Oshundun Olajide, explained that while revenue from crude oil, had suffered reduction within the last three months, N50 billion was shared to the three tiers of government as revenue from non-oil resources. While the Federal Government received N26.340 billion, States got N13.360 billion and Local Government Councils received N10.3 billion.

According to the statement, Companies Income Tax (CIT), Petroleum Profit Tax (PPT) and Oil and Gas Royalties decreased considerably, while there was a slight decline in VAT and Import and Excise Duty, increased marginally.

Indication of how the continued decline from the 13% derivation accruing to oil producing states, will have adverse effect on Delta State particularly, was noted by the Chairman of Delta State Oil Producing Areas Development Commission, DESOPADEC, Hon. Michael Diden, Sunday November 28, during a jaw-jaw with members of DESOPADEC Indigenous Contractors and Stakeholders Forum, DICSF at Sapele in Delta State.

Hon. Diden, a former Chairman of Warri North Local Government Area in Delta State, told the DESOPADEC Contractors: “COVID-19 adversely affected the operations of DESOPADEC. The Commission is expecting its worst monthly allocation so far, for this month as a result of a sharp decline in the 13% derivation shared at FAAC”.

The thrust of this editorial piece, is anchored on the imperative for governments of the crude oil producing states, indigenes of the states and other stakeholders, to brace up for the challenges ahead, so as to mitigate the impending tough times.

Editor-In-Chief

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