Culled—Proshare

May 19, 2020

by FBNQuest Research

The gross monthly payout by the Federation Account Allocation Committee (FAAC) to the three tiers of government amounted to N606bn (US$1.57bn) in May (from April revenue). This was a decline of N175bn on the previous month’s payment. We saw from the thinner-than-usual coverage in the local media last week that receipts from petroleum profit tax, companies’ income tax, import and excise duty, and VAT were all lower on the month. State government finances are particularly squeezed. The better placed states are those that benefit from the 13% derivation formula and/or generate healthy internal revenue.

The gross payout included the statutory allocation of N370bn and the VAT Pool of N94bn. We assume that part of the balance consisted of exchange-rate gains, recalling the sizeable adjustment to the official/preferential rate by the CBN from N307 per US dollar to N360 on 20 March.

The VAT payout declined from N120bn the previous month. The standard rate of VAT was lifted from 5.00% to 7.50% from February but household demand is at best fragile and we should allow for the impact of the lockdown too.

The total payout is set to decline in the months ahead since Nigerian crude is generally sold three months forwards. The price in March and April was at its low point in this cycle. One prominent state governor has suggested that the distribution from June revenue in July may not reach N200bn.

The president is said to have authorized the withdrawal of US$150m from the stabilization fund managed by the Nigerian Sovereign Investment Authority to supplement June’s revenue.

Revenue allocations (gross) by the FAAC (N bn)

Sources: Office of the accountant-general of the federation (OAGF); local media; CBN; FBNQuest Capital Research

Full details of FAAC distributions are available on the OAGF website. The most recent, however, date back from July 2019 (on June revenue).