Tuesday, October 06, 2020 / 09:59
AM /by FBNQuest Research / Header Image Credit: Pressform
The gross monthly payout by the Federation Account Allocation Committee (FAAC) to the three government tiers and eligible agencies was N682bn (US$1.77bn) in September (from August revenue). This was an increase of N6bn on the previous month. From the limited coverage in the local media we learnt that receipts from VAT, companies' income tax, oil and gas royalties, and import and excise duty were sharply higher on the month, while those from petroleum profit tax (PPT) were significantly lower. State governments received a total of N229bn including the 13% derivation formula for the oil producers.
The receipts in the federation account consisted of N532bn for the gross statutory distribution and N150bn out of the VAT Pool. After the deduction of N33bn for collection costs and transfers, the 13% derivation formula was applied and N31bn paid out to the oil-producing states. The balance was then shared among the three tiers.
There has been an encouraging, if not linear, rise in VAT receipts from N94bn in April to N129bn in June and N150bn in August. The hike in the standard rate from 5.00% to 7.50% 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 far short of their needs. In 2019 they spent an average of N396bn per month, compared with N351bn the previous month. 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
PPT and royalties together earned N229bn in May according to the CBN monthly reports, which show a rather higher benchmark of N469bn.
Related to FAAC