Friday, May 27, 2016 9:30AM /FBNQuest Research
The monthly payout by the Federation Account Allocation Committee (FAAC) to the three tiers of government declined to N281bn (US$1.43bn) in May (from April revenues).
We can provide some context by recalling that the federal finance minister described the previous month’s distribution of N299bn as one of the lowest in recent memory. The net distribution from the federation account and the VAT pool combined is projected at N5.72bn this year. The payout is far short of the pro rata monthly average of N477bn this year (see chart).
The minister, Kemi Adeosun, blamed the oil price for the latest dip in the distribution. Revenues in May should reflect the fall in production due to sabotage.
The fiscal relief granted to state governments for the payout last month has not been repeated. Their debt servicing costs were not deducted from the distribution (Good Morning Nigeria, 26 April 2016). Adeosun held out the possibility that further relief was a possibility once the ministry and the DMO had had a microscopic look at their finances.
The states received substantial relief in 2015 in two forms: the restructuring of their bank borrowings into FGN long bonds and long-term credits from the CBN at single-digit interest rates up to a total of N300bn for selected states combined. Nonetheless salary arrears are mounting in most states.
7. Declining Federal Allocation Mounting Pressure on the States – Jan 19, 2016