Culled—-Proshare

June 22, 2020

by FBNQuest Research                                                        

The gross monthly payout by the Federation Account Allocation Committee (FAAC) to the three tiers of government amounted to N547bn (US$1.42bn) in June (from May revenue). This was a decline of N59bn on the previous month’s payment. From the sparse coverage in the local media last week we learnt that that receipts from petroleum profit tax, VAT (N104bn vs N94bn) and import duty were higher on the month, and those from companies’ income tax, oil royalties and excise duty all lower. State governments received a total of N189bn including the 13% derivation formula for those classified as oil producers.                                                                                                     

The previous total distribution included, we assume, a sizeable exchange-rate gain on the back of the CBN’s adjustment to the official/preferential rate from N307 per US dollar to N360 on 20 March.

While the previous total was higher, the statutory allocation of N370bn has been bettered by the latest N414bn. This may reflect the impact of the easing of lockdown in the principal urban centres with effect from the first week of May. 

The next two distributions are likely to be lower. Nigerian crude is generally sold three months forwards, and 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.

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

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

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 the next payout. The stabilization fund, one of three managed by the authority, is designed to respond to shocks such as that created by Covid-19.