July 27, 2020 / 09:31 AM / FBNQuest Research / Header Image Credit: Business Traffic/Ecographics
The gross monthly payout by the Federation Account Allocation Committee (FAAC) to the three tiers of government and eligible agencies amounted to N651bn (US$1.68bn) in July (from June revenue). This was an increase of N104bn on the previous month. From the sparse coverage in the local media we learnt that receipts from VAT, companies' income tax, oil and gas royalties, and import and excise duty were significantly higher on the month, while those from petroleum profit tax were lower. State governments received a total of N214bn including the 13% derivation formula for the oil producers.
The receipts in the federation account amounted to N696bn, consisting of the gross statutory distribution of N524bn, VAT Pool of N129bn and an exchange-rate gain of N43bn. The tiers and agencies received the mentioned N651bn while N45bn was transferred to the excess non-oil revenue account.
There has been an encouraging rise in VAT receipts from N94bn in April to N129bn in June. The hike in the standard rate from the start of February will have been a factor. Nigeria's emergence from partial lockdown will have helped too, not that we are calling a turnaround in household consumption.
The payment to the states again fell short of their needs. In 2018 they spent an average of N371bn per month (N271bn and N100bn on recurrent and capital items). A few states, led by Lagos, generate substantial internal revenue but most depend upon the inadequate monthly FAAC distribution. Further, their access to borrowing has been restricted by the FGN.
Revenue allocations (gross) by the FAAC (N bn)
Sources: Office of the accountant-general of the federation (OAGF); local media; CBN; FBNQuest Capital Research
We had expected a sharp reduction in this month's payout due to a briefing by a prominent state governor and to the far lower oil prices that prevailed in March and April, bearing in mind that Nigerian crude is generally sold three months forward.