The gross monthly distribution by the Federation Account Allocation Committee (FAAC) to the three tiers of government and public agencies amounted to N696.9bn (USD1.7bn) in September (from August revenue).
This shows a -8% or N63.7bn decline from the previous payout. Based on data 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 decreases while VAT and Import duty recorded substantial increases over the previous month. State governments received a total of N217.2bn, including N28.9bn representing the 13% derivation for the few oilproducing states.
The headline figure is made up of N477.5bn in gross statutory distribution, N166.2bn from
the VAT Pool, and fx adjustments totaling N2.8bn, recovered excess bank charges of N403m and N50bn from non-oil revenue. Of the total distribution, N72.3bn was consumed by a combination of costs, transfers and unspecified refunds.
Average monthly allocation amounted to N647bn ytd ’21, compared with N650bn in 2020
and N685bn in 2019. As the allocation to the states again fell short of their aggregate needs.
In 2018 they spent an average of N371bn per month (N271bn on recurrent and N100bn on
capital items) and N396bn in 2019.
According to the Nigerian National Petroleum commission (NNPC), it has in recent months
made deductions from its contributions to the federation. The corporation deducted
N170.4bn in August, N114.3bn in July; and about N126bn in June from its FAAC remittance.
Dip In September Federation Account Allocation Committee Payout
Between January and August, NNPC contributed N349.3bn to the federal, state and local
governments. A breakdown of NNPC’s FAAC remittances includes N90.9bn in January;
N64.2bn in February; N41.2bn in March; N38.6bn in May; N47.2bn in June and N67.3bn in
July. However, zero contributions were made in April to ensure the continuous supply of
petroleum products.
The committee put the balance in the Excess Crude Account (ECA) at USD60.8m.
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 that depend solely on the inadequate monthly FAAC distribution, the
prospects are bleak.
In addition, the CBN started deductions of the USD2.1bn budget support facility from state governments in July ‘21. The federal government had extended the facility to states in 2017 to cushion the impact of dwindling resources and help meet their various obligations.
The FGN has been collecting VAT on behalf of states and local governments. However,
some states are now seeking court rulings to spearhead VAT collection in their respective
states. Lagos and Rivers state have enacted their own VAT laws in response to the original
Federal High court ruling granting Rivers and Lagos the right to collect VAT in their states.
The controversy over VAT has the potential to derail the FGN’s projected N8.4trn 2022
revenue target (i.e. if the case be resolved in the Supreme court in favour of state
governments) and could have an indirect impact on FAAC allocation.
The projected VAT revenue of N2.3trn represents 16.2% of the total projected expenditure of N13.98trn for 2022 passed by lawmakers in the 2022-2024 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) ahead of the expected presentation of the 2022 Appropriations bill to the National Assembly by President.
