1. Forecasting Statutory Allocation

2. www.sparc-nigeria.com What is Statutory Allocation Statutory Allocation (including Net Derivation) represents a significant portion of recurrent revenue for most states, and Local Governments Monthly revenue distribution to the three tiers of government based on sharing ratios It is the distributions of funds collected from Mineral Sector activities as well as Customs and Excise and FIRS (Companies Income Tax) Crude oil benchmarks determine the budgeted actuals Variation in performance of the actual mineral sector (in terms of price, production and FX rate) will determine the actual distributions to the three tiers of government, as will broader macro- economic performance (for non-mineral sector)

3. www.sparc-nigeria.com Forecasting Statutory Allocation First step is to forecast the revenues accruing to federation account. This should be done separately for: Mineral Revenues (mostly crude oil through JV, PPT, Royalties) - should be based on the benchmarks, and historically what proportion of gross crude oil sales revenue ends up in the federation account Non-Mineral Revenues (Customs and Excise) could be based on elasticity forecasting – national real GDP growth and inflation being the drivers Once aggregate revenue accruals are estimates – use the sharing ratios to determine allocation to a specific state

4. www.sparc-nigeria.com Video Presentation The following video is taken from a workshop with Kaduna State Government in June 2015 It starts by showing the Non-Mineral revenues flowing into federation account from FIRS and Customs It then shows an approach to forecast the non- mineral revenues using elasticity forecasting It goes on the forecasting mineral revenues Finally it shows how the aggregate funds are distributed (net derivation, share to state governments, share to a specific state)

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