November 25, 2021 / 09:50 AM / by FBNQuest Research / Header Image
Credit: FBNQuest Research
The gross monthly distribution by the Federation Account Allocation Committee (FAAC) distributed to the three tiers of government amounted to NGN672bn (c.USD1.62bn) in November (from October revenue). This represents a decrease of NGN68bn over the previous month's payout. The decline, according to local media reports, was due to considerable decreases in collections from companies income tax, petroleum profit tax (PPT), and oil and gas royalties. VAT receipt also recorded a slight decrease, while the take from excise duty increased marginally. The federal government received NGN284bn, c.NGN17bn lower than its share in October. The gross distribution to state governments declined by -16% m/m to NGN231bn, including NGN21bn which represents the 13% derivation for oil-producing states. The local governments' share was down NGN8bn to NGN156bn.
The headline figure is made up of NGN364bn in gross statutory distribution, NGN155bn from the VAT pool, and fx adjustments totalling NGN3bn. There were also 'augmentations' of NGN100bn and NGN50bn from non-oil mineral revenue. As in May and June, there has been no official explanation on the reason for these augmentations.
According to the committee, the balance in the Excess Crude Account (ECA) remained unchanged at c.USD61m.
Of the total distribution, NGN44bn was spent on a combination of costs, transfers and unspecified refunds.
The controversy over the proposed deduction of USD418m from states' accounts is still ongoing. Earlier in the month, a Federal court restrained the federal government from making any deduction until all issues relating to it were fully determined. A deduction of such size (c.NGN173.5bn) would put more pressure on already overwhelmed states' finances.
In its FAAC report for October '21, the NNPC disclosed that a total of NGN163.7bn in value shortfall (fuel subsidy claims) was to be deducted from this month's FAAC remittance. The end to fuel subsidies appears close. In the light of the Petroleum Industry Act (PIA), the finance minister disclosed that the FGN plans to discontinue petrol subsidies from H2 '22. While this would translate to better allocations for all three tiers of government, generating more revenue, especially at state level, is a more sustainable option considering the volatility of oil prices.
Revenue allocations (gross) by the FAAC (NGN bn)
Sources: Office of the accountant-general of the federation (OAGF); local media; CBN; FBNQuest Capital Research