Our chart today shows that the gross monthly distribution by the Federation Account Allocation Committee (FAAC) distributed to the three tiers of government amounted to NGN700bn (c.USD1.69bn) in January (from December revenue). This represents a 3.5% (NGN24bn) increase over the previous month's payout. The increase recorded is due to a rise in takes from companies' income tax and value added tax (VAT). Collections from petroleum profit tax (PPT) and oil and gas royalties decreased significantly, while the take from import and excise duties recorded a marginal decrease. The federal government received NGN79bn, c.NGN18bn lower than its share in December. The gross distribution to state governments decreased by -1% m/m to NGN257bn, including NGN35bn which represents the 13% derivation for oil-producing states. The local governments' share rose by NGN8m to NGN164bn.
The headline figure is made up of NGN507bn in gross statutory distribution, NGN187bn from the VAT pool, and fx adjustments totalling NGN5bn.
According to the committee, the balance in the Excess Crude Account (ECA) as of January '21 remained at USD35.4m.
Of the total distribution, NGN30bn was spent on cost of collection while the total deductions for statutory transfers, refunds and savings amounted to NGN37bn.
The NNPC disclosed in its FAAC report for last month that a total of NGN271bn in value shortfall (fuel subsidy claims) was to be deducted from January's FAAC remittance. On Monday, the FGN announced the suspension of petrol subsidy removal "till further notice". We had expected that the complete deregulation of petroleum products slated for H2 '22 would ease the burden of these value shortfalls on the NNPC.
Higher oil prices are likely to remain high this year. Significant subsidy cost and oil production challenges limit the country's ability to maximise the benefits of rising oil prices.
In 2021, FAAC payout averaged NGN677bn. The corresponding figures for 2020 and 2019 are NGN636bn and NGN685bn respectively.