FAAC Payouts Inadequate, and on a Plateau


Thursday, May 27, 2021 / 10:23 AM / by FBNQuest Research / Image Header Credit: FBNQuest

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The gross monthly distribution by the Federation Account Allocation Committee (FAAC) to the three tiers of government and public agencies amounted to NGN617bn (USD1.50bn) in May (from April revenue). This was a decline of NGN64bn on the previous payout. We read in the patchy coverage in the local media that the committee noted a healthy increase in the collection of petroleum profit tax and excise duty, which was outweighed by a fall in the take from companies' income tax, oil and gas royalties, VAT and import duty. State governments received a total of NGN230bn in the distribution, which included NGN36bn for those states that benefit from the 13% derivation formula.


The headline figure consists of NGN430bn in gross statutory distribution, NGN165bn from the VAT Pool, a NGN2bn exchange-rate adjustment and a non-oil "augmentation" of NGN20bn.  There has been no official explanation why the committee chose to top up the distribution with this last payment. It is clear, however, that recent committee meetings have been tense.


Costs, refunds and transfers consumed NGN79bn of the total distribution, compared with NGN88bn one month previously.


Average monthly total distributions have fallen from NGN710bn in 2018 to NGN636bn last year and have now settled on a plateau.


Current levels are far short of states' aggregate needs. Data on subnational finances are poor but we see from CBN statistics that their total spending averaged NGN351bn in 2018 and NGN396bn in 2019 (ie roughly 70%  more than what they have just received).


A small number of states, led by Lagos, can still meet their spending commitments including capital items at this lower level of FAAC payout because they collect internally generated revenue on a substantial scale.  This revenue represented 47% of its total revenue in H1 '20. The ratio was earlier higher.


The latest available full FAAC report (for the payout in January from federation account inflows in December 2020) provides further colour. The gross statutory allocation for Lagos of NGN3.39bn became -NGN1.04bn net negative after deductions for debt payments on its external debt and its NGN bond issuance. However, its final net payment amounted to NGN11.70bn after receiving its share of the VAT Pool.


Revenue allocations (gross) by the FAAC (NGN bn)

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Sources: Local media; FBNQuest Capital Research

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Related to FAAC

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  2. FAAC Disburses N2.49trn to FG and N2.30trn to States in Year 2020 - NBS
  3. FAAC Disburses N601.11bn in December 2020 - NBS
  4. FAAC Disburses N604.00bn in November 2020 - NBS
  5. FAAC Disburses N639.90bn in October 2020 - NBS
  6. FAAC Disburses N682.06bn in September 2020 - NBS
  7. FAAC Disburses N676.41bn in August 2020 - NBS
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  10. FAAC Disburses N606.19bn in May 2020 - NBS
  11. FAAC Disburses N780.93bn in April 2020 - NBS
  12. FAAC Disburses N581.57bn in March 2020 - NBS
  13. FAAC Disburses N647.35bn in February 2020 - NBS
  14. FAAC Disburses N716.30bn in January 2020 - NBS
  15. FAAC Disburses N2.93trn to FG in 2019 - NBS
  16. FAAC Disburses N650.83bn in December 2019 - NBS

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