Tuesday, February 23, 2021 / 10:33 AM / by
FBNQuest Research / Header Image Credit: iStock
The gross monthly distribution by the Federation Account Allocation Committee (FAAC) to the three government tiers and eligible agencies totalled NGN640bn (USD1.56bn) in February (from January revenue), This was NGN21bn above the previous month's payout. From thin coverage in the local media, we learnt that the take from petroleum profit tax (PPT) was substantially higher than the previous month, that the collection of import duty was a little higher, and that receipts from VAT, oil and gas royalties, and excise duty were lower than in December. State governments received a total of NGN204bn including NGN27bn representing the 13% derivation for the few oil-producing states.
The headline figure is made up of gross statutory distribution of NGN483bn and the VAT Pool of NGN157bn.
Of the total distribution, NGN76bn was consumed by a combination of costs, transfers and unspecified refunds.
The trend in total distributions has been downward, from an average of NGN710bn in 2018 to NGN685bn in 2019 and NGN636bn last year.
In our search for green shoots and positives, we note the trend increase in VAT Pool revenue for sharing since the hike in the standard rate in February 2020 from 5.0% to 7.5%. (The latest figure marks a fall from the previous month's NGN171bn but we should allow for the fact that December brings the annual peak in household spending.)
This latest payout to states falls far short of their spending, which averaged NGN351bn per month in 2018 and NGN396bn last year. It would not even have covered their salaries and pensions in aggregate.
A small number of states, led by Lagos, can meet all their obligations at these reduced levels of FAAC distribution because they collect substantial sums of internally generated revenue (IGR). Lagos reported total revenue of NGN433bn in H1 '20, divided between IGR (47%), capital receipts such as loan/bond proceeds (34%) and FAAC payouts (just 19% of the total).
We show PPT and royalties in our chart (before distribution) as a point of reference. We should remember, however, that three months lapse between the initiation of a crude oil sale contract and the remittance of the sale proceeds to the federation account. We should therefore be patient if we are looking for any passthrough from the latest pick-up in the crude price above the USD60/b threshold.
Revenue allocations (gross) by the FAAC (NGN bn)
Source: Office of the accountant-general of the federation (OAGF); local media; FBNQuest Capital Research
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