Data from the NBS shows that the Federal Account Allocation Committee (FAAC) disbursed the sum of N701.0bn to the three tiers of government in May 2018 from the revenue generated in April 2018.
This amount represents a 9.9% appreciation from the N638.1bn disbursed in April and the highest disbursement recorded so far this year. Expectedly, this can be attributed to oil price rally, which appreciated 11.1% Apri-18 alone. Considering that the rally continued into May-18, touching a 3 year high of $79.9/b and advanced 3.0%m/m, we expect further robust FAAC disbursements in June. However, reduced local production reported in the period is a downside.
Beyond the regular disbursements, we observed that 3.5% of total disbursement, N24.5bn, was transferred to the Excess Crude Account (ECA), the first of such since Nigeria slipped into recession in Q1-16. The ECA was created in 2004, managed by the Nigeria Sovereign Investment Authority, to save oil inflows above the budgeted revenue, with the objective to primarily protect planned budgets against shortfalls if events in the oil market move against the domestic economy.
In the coming months, given the outlook for a sustained uptrend in oil prices, we reiterate the need to save for the proverbial rainy day, however, this could be impeded by weaker domestic production level given the fragility of the stability in the N/delta.