AN ASSESSMENT OF FOREST REVENUE GENERATION IN AKWA IBOM STATE,
NIGERIA
Nelson, I. U. and Jacob, D. E
Department of Forestry and Natural Environmental Management, University of Uyo, Nigeria
Correspondence email: [email protected]; [email protected]
ABSTRACT
It is generally accepted that financial considerations represent one of the most important factor
that have an impact on the implementation of sustainable forest management. The study
examined the system of revenue generation and its impact on sustainable forest management in
Akwa Ibom State, Nigeria between 2001 and 2010 using secondary data on targeted and actual
revenue, expenditure and revenue allocation. Data were analyzed using descriptive and inferential
statistics including achievement index. The results indicate a positive correlation (r = 0.79) between the
targeted and actual revenue for ten years under investigation. The actual generated revenue was
₦50,598,666 during the period under review (2001-2010). The state government approved a total
of ₦470 million for the development of the forestry sector, yet a total of ₦48.419 million was
released over the period. The amount approved for forestry development in the state is 821.6%
greater than the generated revenue. This is an indication of poor revenue generation which may
not encourage sustainability of the forest. There is need to review the charges levied under the
various forest revenue systems in the state (i.e. stumpage, OTV and unit area charges and
hammering) with intensive production, control and monitoring. This could improve the forest
revenue base of the state which will enhance the sustainability of forest management in the state.
INTRODUCTION
The forests provide multiple benefits such as goods and services (soil and its mineral deposits,
water sources, rocky outcrops, rare landscapes and, in the biological sense, plant and animals in
all their various forms) important to people’s livelihoods, economic growth, foreign exchange
earnings, and environmental services (FORMECU, 1999). The forest is, therefore, an economic
treasure house of resources and if properly managed, Nigeria’s forests can supply its people’s
needs in perpetuity (FAO, 2001). The range of actors involved in the production and
consumption of forest-based goods and services include governments, private industry, local
communities, individual forest owners and their associations, and nongovernmental
organizations (FAO, 2010).
The sale of forest resources is one of the major ways in which government interacts with the
people through the generation of economic, social and cultural activities (FAO, 2001). These
activities become a source of employment to timber contractors; saw millers and gatherers of
non-wood forest products. It is from this plethora of activities that government formulates policy
for attaining specific forestry goals and implementation of economic development activities. One
of the most important aspects of this policy is the forest revenue system, which Gray (1997)
defined as the mechanism put in place by government to set and collect charges on forest
resources for the sustainable development of forestry in particular and the economy in general.
The main sources of forest revenue in Nigeria are different in the two broad ecological zones of
the wet south and the dry north (FAO, 2001). The parameters used for assessing forest charges
on timber in Nigeria include Stumpage, Out-Turn Volume (OTV) and Unit Area Charge.
According to Omoluabi et al., (1993), forest revenue system is a policy instrument that can be
used effectively to ensure that a nation obtains maximum benefits from the management of its
forest resources. It is a strong instrument for stimulating appropriate forest industrial
development and efficient wood utilization. Generation of revenue appears to be the most
important primary role of the various state forestry departments in Nigeria whereby constituted
authorities only concentrate efforts on how to maximize revenue from the sale of forest produce
by granting large tracks of land for harvesting to the total neglect of forest regeneration and
management (Ajayi and Omoluabi, 1993). The definition of the term Sustainable Forest
Management as adopted by the FAO (2005) is: “the stewardship and use of forests and forest
lands in a way, and at a rate, that maintains their biodiversity, productivity, regeneration
capacity, vitality and their potential to fulfill, now and in the future, relevant ecological,
economic and social functions, at local, national, and global levels, and that does not cause
damage to other ecosystems.” The emphasis on both environmental and social goals increases as
one move onwards from sustained yield forestry to sustainable forestry to sustainable forest
management (Awudi and Davies, 2001)
The forest revenue system in Nigeria is reported to be weak and not designed to maximize the
range of benefits that could be produced from Nigerian forests (Aruofor, 1986). Therefore,
forest resources are characterized by low forest fees and collection rates (Gray, 1997). Apart
from the negative implication on government revenue, the low forest charges encourage
inefficiencies, distortion of forest management decisions which causes difficulties in forest
management. Therefore, the study will examine the trend of forest revenue collections and its
impact on sustainable forest management through the assessment of the parameters used for
forest charges on timber and non timber forest products; examine the relationship between
targeted and generated revenue in the state, examine the percentage of revenue generation
used for forestry development in state; and the effect of forest revenue on sustainable forest
management in Akwa Ibom state.
METHODOLOGY
Akwa Ibom State is located in the southern part of Nigeria between latitudes 4o33' and 5° 35' N,
longitudes 7° 35' and 8° 25' E covering a land area of 52761.76km2 with a population of
141,408 delineated into 31 Local Government Areas. It is located within the tropical rainforest
zone (NPC, 2007). The state has common borders with Cross River State to the East, Abia State
to the North, Rivers State to the West, and the Atlantic Ocean to the South (AKADEP, 2006).
The climate of the state is characterized by two seasons – rainy or wet season, which lasts for
about 8 months (mid-March to November) and the dry season (December to early-March). The
total annual average rainfall is about 2500mm (Ekanem, 2010). Temperatures are uniformly high
throughout the year with slight variation between 26oC and 28oC. The soil types found in Akwa
Ibom State are associated with one another in an intricate manner, but are very similar (Peters et
al., 1994). The existing climatic factors in Akwa Ibom State would have favored luxuriant
tropical rainforests with teeming populations of fauna and extremely high terrestrial and aquatic
biomass. However, both the vegetation and the fauna of the State are largely degraded because of
strong human population pressure. The native vegetation has been almost completely replaced by
secondary forests of predominantly wild oil palms, woody shrubs and various grass
undergrowths. Farmlands mixed with oil palm and degraded forests predominate in the rest of
the state (onlinenigeria.com).
Figure 1: Map of Akwa Ibom State with local government areas
DATA COLLECTION
Data on forest revenue generation (targeted and actual revenue generated), the parameters
used in tariff rate fixation, budgetary allocation for forestry operation and Government
expenditure in forest management were obtained from the Directorate of Forestry, Akwa Ibom
State. Other relevant information was sourced from the review of literature.
ANALYTICAL PROCEDURE:
Descriptive statistics employed for data analysis include mean, frequency table, bar-chart and
simple percentage. Forestry performance in revenue generation with respect to the set targets was
determined by the achievement index while inferential statistics employed correlation (r). The
formula for correlation is given as follows:
𝑟 =
(∑ X)(∑ Y)
n
(∑ X)2
(∑ Y)2
2
√[∑ X −
][∑ Y2 −
]
n
n
∑ XY−
-
(1)
Where r = Correlation coefficient;
X = Independent variable (projected revenue)
Y = Dependent variable (actual revenue)
n = Total number of years investigated
Forestry performance in revenue generation with respect to the set targets was determined by the
achievement index, q.
Thus:
𝐴𝑖
qi
=
x (100)
(2)
𝑇
𝑖
Where Ai = revenue collected in year I (n)
Ti = revenue target in year I (N)
i = year; 2001, 2002,………2010
qi = achievement index in year I (%)
The annual and average growth rates in revenue collections and targets were estimated using the
appropriate formulae given below (Udo, 1999)
(i) gct
=
(ii) gTt
=
(iii) ac
=
(iv) At
=
Where gct
At
At-1
gn
T1
Tt-1
ac
at
=
=
=
=
=
=
=
=
𝐴−𝐴𝑡−1 (100)
𝐴𝑡−1
𝑇−𝑇𝑡−1 (100)
1
𝑛
1
𝑛
∑
∑
-
-
-
-
(3)
-
-
-
(4)
-
-
-
(5)
-
-
-
(6)
𝑇𝑡−1
𝐴−𝐴𝑡−1 (100)
𝐴𝑡−1
𝑇−𝑇𝑡−1 (100)
𝑇𝑡−1
Annual growth rate in revenue in year t (%)
Revenue in year t (₦)
Revenue a year before year t (₦)
Annual growth rate in revenue target in year t (%)
Revenue target in year t (₦)
Revenue target a year before year t (₦)
Average growth rate in revenue (%)
Average growth rate in revenue target (%)
RESULT AND DISCUSSION
Parameter/Sources of forest revenue:
In Nigeria, forest revenue source include revenue from sales of timber by Out-Turn-Volume
(OTV), Stumpage value and Area Basis, Hammering fees and non timber products (FAO,
2001). The main source of forest revenue generation in Akwa Ibom State is timber and this is
mostly through Stumpage value sales method, Hammering fees, non timber product and also
various fees on wood based industries, which differ according to their size and scale of
operation. The OTV and area based method are not currently in use as a result of low forest
estate in the state. Fees on non-wood forest products and fines on forest law violations also
contribute to forest revenue in the state. Although, the percentage of contribution of all the
revenue sources to total revenue collected could not be well defined due to paucity of data
from forestry department. Table 1 shows the average charges for forest products and services
in Akwa Ibom State.
Table 1: Average charges for forest products and services in Akwa Ibom State
Forest product/service
Unit
Average forest charge
(a)Timber
Stumpage
per tree
3829
Grade 1 species
per cubic foot
3800
Grade 2 species
per cubic foot
3600
Grade 3 species
per cubic foot
3200
Grade 4 species
per cubic foot
2000
Poles
per pole
3000
Fuelwood
Per cubic metre
2000
Hammering
Per lorry
5000
Non-wood and minor forest products
per month
100-1000
(e.g. ropes, leaves, canes, etc.)
(b) Forest industry licences
Benchmill
per unit
10,000
Sawmill
per unit
6000
Fibre boardmill
per unit
60,000
Timber preservation/seasoning
per unit
80,000
Source: Forestry Department, 2013
Relationship between Targeted and Generated Revenue in Akwa Ibom State
The study revealed that for each fiscal year the state forestry service is given a set revenue
target by the state government. Consequently, the revenue targets represent what the state
government expects the forestry service to generate for a particular fiscal year. As shown in
table 2, the study indicates further that the target revenues are arbitrarily fixed, considering the
previous year’s performance (Forestry Department, 2013). Figure 2 shows that the revenue
generated between 2001 and 2010 followed an increasing trend except for breaks in 2004,
2005, 2007 and 2010 respectively. More so, the target revenues between 2001 and 2010 did
not follow a definable progression. For instance, in 2001 the projected revenue increased from
₦1.110 million to ₦4.450 million in 2003, and then decreased to ₦4.00 million in 2004 and
rapidly increased to ₦5.710 million in 2006. The target revenue by the year 2010 was
₦11.400 million. This trend showcased an arbitrary nature of projected revenue fixtures
although information for the target revenue for 2005 and 2007 were not available when the
study was conducted. Table 2 further reveals that between 2001, 2002 and 2006, the annual
revenues generated were higher than the targeted revenues except for 2003, 2004, 2008, 2009
and 2010 with -4.45%, -12.50%, -8.69%, -35.20% and –120.93% respectively (Table 2). The
targeted revenues and the generated revenues between 2001 and 2010 showed positive
correlation (r = 0.79).
Table 2: Target Revenue and Generated revenue in Akwa Ibom State
Target Revenue (₦)
Generated Revenue(₦)
Year
% increase
2001
1110000
1437461
22.78
2002
1755000
4055340
56.72
2003
4450500
4260710
-4.45
2004
4000850
3556285
-12.50
2005
n.a.
3426130
2006
5710000
9262370
38.35
2007
n.a.
3450270
2008
8216000
7559130
-8.69
2009
11400000
8432210
-35.20
2010
11400000
5158760
-120.93
Total
48042350
50598666
-63.92
Source: Forestry Department (2013)
Forest Revenue Target, Achievements and Growth Rates from 2001-2010
From Table 3, the revenue targets ranged from ₦1.11 million in 2001 to ₦11.40 million in 2010
and averaged approximately ₦6,005,293.75. Revenue generated ranged from ₦1.43 million in
2001 to ₦9.26million in 2005 and decreased to ₦3.45million in 2006, averaging ₦5,465,283.25
approximately. The generated revenue exceeded the set target every year except in 2003, 2004,
2008, 2009 and 2010 when the respective achievement indices were 95.74%, 88.89%, 92.00%,
73.97% and 42.25% respectively. The average achievement index was 114.83% per annum. The
average growth rates per annum of revenue targets and generated revenue collection were
48.07% and 28.68% respectively.
Comparatively, the revenue target and generated revenue of Akwa Ibom State from 1988 to 1996
as reported by Udo, (1999) with the achievement index of 115.83% was relatively similar to the
revenue target and generated revenue from 2001 to 2010 with an achievement index was
114.83% per annum. This is an indication that revenue generated from forestry division is still on
the average, exceeding its set revenue target in some years. Revenue targets and generated
revenue collections were respectively increasing at the rate of 28.7% per annum 1988-1996 and
2001-2010 during the periods studied. However, the target revenue increased at a faster rate of
75.67% for 1988-1996 and 48.07% for 2001-2010. These increased target revenue over the two
periods under review were aimed at inducing a higher generated revenue collections annually.
Table 3: Forest Revenue, Achievements and Growth Rates from 2001-2010
Year
Target
Actual
Achievement
Yearly growth rate (%)
Revenue (₦)
Revenue (₦)
(T)
index (%)
Target
Actual
2001
1,110,000.00
1437461.00
129.50
2002
1,755,000.00
4055340.00
231.07
58.11
182.12
2003
4,450,500.00
4260710.00
95.74
153.59
5.06
2004
4,000,850.00
3556285.00
88.89
-10.10
-16.53
2005
3426130.00
2006
5,710,000.00
9262370.00
162.21
2007
3450270.00
2008
8,216,000.00
7559130.00
92.00
2009
11,400,000.00
8432210.00
73.97
38.75
11.55
2010
11,400,000.00
5158760.00
45.25
0.00
-38.82
Mean
6,005,293.75
5465283.25
114.83
48.07
28.68
Akwa Ibom State Government expenditure on forest management
Forest management in Nigeria is the responsibility of the state governments and the Federal
Capital Territory Authority. The roles of the Federal Government are mainly to co-ordinate
policy and manage the flow of funds to the state forestry services. Unfortunately, the release
of approved funds to the sector from state’s budget in the past ten years has varied from zero
to less than 82 percent of the total budget for capital expenditure/investment approved for the
sector (Figure 3).
An analysis of approved budget and funds released for capital expenditure on forest
management in Akwa Ibom State for the past nine years (2002 – 2010) is presented in Figure
3. The figure shows that in 2007 and 2009 no funds were released for any forest development
project in the state. The highest fund released for forest development project was in 2002
(₦14.72M) and 2006 (₦12.86M) respectively. However, government approved budget
expenditure for forest development in the state increased steadily between 2002 and 2010
(Figure 3).
Figure 3: Budget approved and funds released for capital investment in the forestry
sector in Akwa Ibom state from 2002 – 2010
With respect to approved budget expenditure for sustainable forest management in Akwa
Ibom State for the past nine years, forest regeneration accounted for only 25.53%, wildlife
sanctuary 28.72%, forest nursery development 12.97%, forest protection 8.51%, building of
forestry headquarters 17.04% and biodiversity conservation 7.23% of the approved forest
budget expenditure in the state (Figure 4). The total approved budget expenditure for forestry
development in the state for the ten year period was 821.6% of the total forestry revenue
generated for the same period.
Figure 4: Approved budget expenditure for forest development projects in Akwa Ibom
State (2002-2010)
Moreover, Figure 5 indicates that 54.19% of the total amount released for forest expenditure
in the state was used for forest regeneration project. Forest nursery development and wildlife
sanctuary projects amounted to 20.16% and 10.64%, forest protection 8.89% and biodiversity
conservation project 6.16% respectively. No funds were released for building of the forestry
headquarters throughout the period under review, although its first budget approval was given
in 2008.
Figure 5: approved funds released for forest development projects (2002-2010)
The allocation for the forest regeneration project in the State had the largest approved budget
expenditure released between 2002 and 2010. This is an indication that the state government
had placed more priority in the regeneration of its forest reserves that had been degraded
through agricultural development, over-exploitation of forest resources and infrastructural
development in the state.
CONCLUSION AND RECOMMENDATION
The forest revenue system in Akwa Ibom State cannot maximize the diverse range of benefits
that could have been produced from the forest resources in the state. The attitude of the state
government towards forestry development in respect to release of funds is not sufficient, it is
hoped that more funds will be made available to the sector in the future when the government
shows enough political will towards forestry development. This change will also lead to a
solution of some of the problems in the forestry sector, with a reorganization of the forest
revenue system and the involvement of all stakeholders in the revenue system formulation,
collection and sharing of benefits to deserving communities.
RECOMMENDATIONS
The following recommendations are made as a way forward in improving the forest revenue
generation and sustainable forest management in the state:
 The state forest revenue system should be revised to improve the state’s revenue base.
However a discriminatory pricing policy should be introduced to protect the poor that
depend on non-wood forest products for subsistence and to protect severely threatened
timber species.
 Stumpage fees and OTV charges should more accurately reflect the market prices of
round wood and unit area charges should be based on the stocking and land area
involved.
 The stakeholders, in terms of forest revenue are the government (the state and the local
government) and the rural communities from whose traditional lands the revenues are
generated. The revenue that is distributed to the local community based on the revenue
sharing formula of 80% (State) and 20% (Local community) for communities in the
reserves are quite inadequate. The adequacy of the existing revenue sharing formulae
in the state can only be determined if stakeholders participate fully in decision making
with regards to forest management in the state.
 Increasing the charges levied under the various forest revenue systems in the state (i.e.
stumpage, OTV and unit area charges and hammering) could, with intensive
production control and monitoring, improve the forest revenue base of the state. Inbuilt and self-regulatory collection of forest charges, in accordance with effective
pricing policy of forest products and the supply and demand conditions in the state
will also improve the forest revenue collection.
 Evasion of charges could also be minimized or eliminated if the fixing of tariff rates,
production monitoring, revenue collection and revenue sharing are based on
participatory approaches, involving the rural communities that have had their lands
reserved or whose forest resources are used as sources of revenue by government.
 The revenues generated from the forest should be made available for forest
management and also, the major users of forest products should be encouraged to
invest in forest management example timber contractors, forest based industries,
individuals and communities. This will aid in the improvement of forest revenue
generation and sustainability of forest management in Akwa Ibom State.
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