January 2018 FAAC Disbursement: Sustaining the Positive Spell

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Thursday, February 22, 2018 / 05:03 PM / Proshare Research 

According to the National Bureau of Statistics (NBS), the federation allocation committee (FAAC) disbursed the amount of N655.178 billion in the month of January 2018. FAAC disbursement for the month of January 2018 rose by 6.9% and 41.79% respectively compared to the previous and corresponding months in 2017. 

The persistent bolstering in FAAC is a positive spell to revenue inflow to all the tiers of government. 

Fig 1: FAAC from Dec 2016 to Jan 2018
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Source: NBS
 

Digging beneath the headline figures, statutory revenue generated in the month of January 2018 contributed N538 billion to the FAAC pool.  Statutory revenue climbed to its highest level in five months as it grew by 1.63%. However the high base put the curve in a relatively flat position, regardless of the increase in absolute terms experienced.
 

In its random nature, excess charges on account contributed N1.93 billion to the FAAC pool, higher than its last contribution in November 2017, which was N0.994 billion.  There were neither refunds from the Nigerian national petroleum company (NNPC) nor contribution from the excess petroleum product tax’s in the month of January. Unlike the previous and penultimate months, the foreign exchange equalization fund shored up the FAAC pool with N30.7 billion 
  

Fig 2:  FAAC Pool for January 2018
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Source: NBS
 

The second largest component of the FAAC pool, Value Added Tax (VAT) contributed N83.9 billion to the pool. VAT grew by 4.3% on a monthly basis in January. Implying a recovery from the sudden fall it experienced in the previous month. However the VAT to FACC ratio stood at o.128 for the month of January, obviously below the previous and 12 month average ratio of 0.136 and 0.152 

Fig 3:  Value added Tax (VAT) from Dec 2016 to Jan 2018
Proshare Nigeria Pvt. Ltd.
Source: NBS
 

Therefore, the shoring up by the equalization fund and the increase in statutory revenue eroded the ratio. However the present monetary dynamic has limited the room for foreign exchange gains compared to a year ago.
 

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