November 1, 2022/CSL Research
Based on a Business Day news report, the federal government, states, and local government councils received N760.235bn in September 2022 from the Federation Account Allocation Committee (FAAC). According to the report, of the total distributable revenue of N760.235bn the Federal Government received N294.244bn, the states received N233.223bn and the LGs received N172.776bn. N59.992bn was shared to the relevant states as 13% derivation
revenue. The N760.235bn total distributable revenue comprised of the distributable statutory revenue of N502.135bn, distributable Value Added Tax (VAT) revenue of N189.928bn, Electronic Money Transfer Levy (EMTL) revenue of N8.172bn and augmentation of N60bn.
Gross statutory revenue received for the month of September was N825.7bn, which was 26%higher than the N654.360bn received in August. Based on available data, a net total FAAC distribution of N6.48trn has been shared among the three tiers of government from January to October 2022. The Federal Government received a total of N2.74 trillion while the States and Local Governments got N2.15 trillion and N1.59trn respectively. Most states depend on monthly allocations from the Federation Account to fund a significant part of their budgets and typically experience financial difficulties when FAAC allocations decline. However, there are a few exceptions such as Lagos, which have been able to significantly grow their internally generated revenues. prognosis
The October report was however silent on any remittance from NNPC Limited which by virtue of its commercialisation is expected to halt remittances to the federation account and pay dividends to the Federal Government- the current shareholders. Crude oil sales have been a key contributor to the federal account. Despite the recent stability in the price of crude oil, recurrent shut-ins at various crude oil pipeline installations, triggered by vandalism, lack of maintenance and massive crude oil theft, have led to a severe decline in crude oil production.
Petrol subsidy claims have also ensured that no remittances have been made as at August 2022. We note that a switch from monthly FAAC disbursements from NNPC to an annual or semi-annual dividend cashflow may further stifle the fiscal space especially for state governments.
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