December 30, 2021 / 09:25 AM / by FBNQuest Research / Header Image
The gross monthly distribution by the Federation Account Allocation Committee (FAAC) distributed to the three tiers of government amounted to NGN676bn (c.USD1.65bn) in December (from November revenue). This represents a NGN4bn increase over the previous month's payout. The increase in FAAC payout is attributed to significant increases in takes from companies' income tax, value added tax (VAT), petroleum profit tax (PPT), and oil and gas royalties according to local newswires. Collection from import and excise duty, however, recorded marginal increases. The federal government received NGN261bn, c.NGN23bn lower than its share in November. The gross distribution to state governments increased by 12% m/m to NGN259bn, including NGN49bn which represents the 13% derivation for oil-producing states. The local governments' share was down NGN544m to NGN155bn.
The headline figure is made up of NGN489bn in gross statutory distribution, NGN183bn from the VAT pool, fx adjustments totalling NGN4bn, and recovered excess bank charges of NGN438m.
According to the committee, the balance in the Excess Crude Account (ECA) declined significantly to c.USD35.4m from c.USD61m in the previous month.
Of the total distribution, NGN31bn was spent on cost of collection while the total deductions for statutory transfers, refunds and savings amounted to NGN137bn.
In its FAAC report for November '21, the NNPC disclosed that a total of NGN199bn in value shortfall (fuel subsidy claims) was to be deducted from this month's FAAC remittance. As a result, the NNPC was able to remit only 8.5% (NGN10.5bn) of its projected NGN122.7bn to the federation account. We expect a respite from the corporation's dwindling contribution to the government coffers when the proposed deregulation of petroleum products takes effect from H2 '22. In addition to this, the country must ramp up its oil production if it is to fully maximise the benefits of rising oil prices. According to OPEC data obtained from secondary sources, Nigeria's oil output (excluding condensates) was up 6% m/m to c.1.42mbpd in November.
While eliminating fuel subsidies and improving oil production would greatly improve the fiscal position of the three tiers of government, a more sustainable path, given the volatility of oil prices, is required to boost revenue generation.
Revenue allocations (gross) by the FAAC (NGN bn)
Sources: Office of the accountant-general of the federation (OAGF); local media; CBN; FBNQuest Capital Research