July 22, 2021/Proshare
by FBNQuest Research
The gross monthly distribution by the Federation Account Allocation Committee (FAAC) to the three tiers of government and public agencies amounted to NGN733bn (USD1.78bn) in July (from June revenue). This was an increase of NGN127bn on the previous payout. From thin coverage in the local media, we learnt that the take from petroleum profit tax (PPT), companies’ income tax, import and excise duty, and oil and gas royalties recorded substantial increases over the previous month, while receipt from VAT was significantly lower. State governments received a total of NGN143bn, including NGN51bn representing the 13% derivation for the few oil-producing states.
The headline figure is made up of NGN586bn in gross statutory distribution, NGN143bn from the VAT Pool, and fx adjustments totalling NGN4bn.
The committee put the balance in the Excess Crude Account (ECA) at USD61m.
Of the total distribution, NGN87bn was consumed by a combination of costs, transfers and unspecified refunds.
Average monthly allocation amounted to NGN647bn in H1 ’21, compared with NGN710bn in 2018, NGN685bn in 2019 and NGN636bn last year.
The allocation to the states again fell short of their aggregate needs. In 2018 they spent an average of NGN371bn per month (NGN271bn on recurrent and NGN100bn on capital items) and NGN396bn in 2019.
A few states, led by Lagos, generate substantial internal revenue and can still meet their spending commitments, including capital items, at these reduced levels of FAAC payout. For most states who depend solely on the inadequate monthly FAAC distribution, the prospects are bleak: at a National Executive Council (NEC) meeting last week, the minister of finance, budget and national planning disclosed that deductions of the budget support facility from state governments will now commence from July. The federal government had extended the facility to states in 2017 to cushion the impact of dwindling resources and help meet their various obligations.
Revenue allocations (gross) by the FAAC (NGN bn)
Sources: Local media; FBNQuest Capital Research