State and Local Govts | |
State and Local Govts | |
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Wednesday, December 30, 2020 / 09:23 AM / By FBNQuest
Research / Header Image Credit: The Nation
The
gross monthly distribution by the Federation Account Allocation Committee
(FAAC) to the three government tiers and eligible agencies amounted to NGN601bn
(USD1.53bn) in December (from November revenue), This was NGN3bn lower than the
previous month's payout: the earlier distribution, however, included a
drawing of NGN20bn from the stabilization fund that is managed by the sovereign
wealth authority. From one cursory account in the local media, we learnt that
the take from oil and gas royalties, import and excise duty, and petroleum
profit tax (PPT) was substantially higher than in October while the
collection of companies' income tax was much lower. State governments received
a total of NGN202bn including 13% derivation for the few oil-producing states.
The headline figure is made up of
gross statutory distribution of NGN436bn, the VAT Pool of NGN157bn and fx
equalization amounting to NGN8bn.
Although fractionally lower than the
previous month, it did not include a drawing from the stabilization fund, as
noted, or an unspecified FGN intervention, as occurred with the distributions
in both October and November.
If we are looking for a positive
trend, it would be the rise in VAT collection due to the increase in the
standard rate this February and improving coverage (Good Morning Nigeria, 24
December '20). The rise amounted to 29.2% q/q and 41.5% y/y in Q3 '20.
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. We have seen local media reports of several state governments' 2021
budget proposals, and they are mostly detached from reality in the sense that they
do not acknowledge their modest revenue or their very limited access to new
borrowing due to controls tightened by the federal finance ministry and the
Debt Management Office.
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.
There are three months between the
initiation of a crude oil sale contract and the remittance of the sale proceeds
to the federation account. To reinforce this point from our chart,
receipts from PPT and oil royalties tanked in July, ie three months on from the
low for the oil price this year when very briefly traders and shippers had to
pay to dispense with their cargoes of WTI crude.
Revenue
allocations (gross) by the FAAC (NGN bn)
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Source: Office of the accountant-general of the federation (OAGF);
local media; FBNQuest Capital Research |
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