Fiscal Ill-health of Most States

Monday, October 19, 2020 09:43 AM /by FBNQuest Research/ Header Image Credit:  FBNQuest 

The gross monthly payout by the Federation Account Allocation Committee (FAAC) to the three government tiers and eligible agencies was N640bn (US$1.66bn) in October (from September revenue). This was a decline of N40bn on the previous month. From the limited coverage in the local media we learnt that receipts from companies' income tax (CIT), and oil and gas royalties were sharply lower on the month, that the take from import duty and VAT was marginally down and that collections from excise duty and petroleum profit tax were higher. State governments received a total of N222bn including derivation.

The receipts in the federation account consisted of N342bn for the gross statutory distribution, the lowest since May 2017, N142bn out of the VAT Pool and the balance of N156bn from a combination of fx equalization, non-oil excess revenue and an FGN intervention.

The sharp fall in statutory revenue is an obvious concern, not least for the read-across to the state of the underlying economy. While there could be anomalies due to the impact of the Covid-19 virus on tax gathering, we should also recall that September is generally a strong month for the collection of CIT and that this generated N203bn in the month in 2019.

The trend in the gross annual payout has been positive: from N5.82trn in 2015 to N8.52trn in 2018 before a small drop to N8.22trn last year.

However, the spending of states has also soared. They spent an average of N396bn per month in 2019, compared with N351bn the previous year. Such outlays are far above their monthly receipts from the FAAC payout. For a small number of states, internally generated revenue provides a substantial additional inflow. In the case of Lagos, this revenue was four times its payout in H2 2020.

Download Here - 2020 State of States Report by BudgIT

Related News

1. The New Normal; States Scurry for Higher IGRs
2. States Generated N612.87bn as IGR in H1 2020 - NBS
3. Carving a Pathway to Fiscal Sustainability in a Time of Pandemic
4. Reluctance to Lend to State Governments
5. Stakeholders Urge Sub-Nationals To Rethink Strategies for Fiscal Sustainability
6. 2020 State of States Report: Osun, 12 Others Lack Revenue Capacity to Fund Recurrent Expenditure
7. FAAC Payout Well Short of States' Needs
8. RMAFC Emphasise Need for Sub-nationals to Improve IGR
9. Unemployment - Sub-Nationals in Focus - Imo State Records Highest Unemployment Rate of 48.7%
10. Heavy Weight of State Government Debt