January 23, 2023/CSL Research

Based on a Business Day news report, the federal, state, and local governments received a total of N990.19bn for the month of December 2022 from the Federation Account Allocation Committee (FAAC). According to the report, of the total distributable revenue, the Federal Government received N375.31bn, the states received N299.56bn and the local governments received N221.81bn. N93.52bn was shared to the relevant states as 13% derivation revenue. The N990.19bn total distributable revenue comprised of the distributable statutory revenue of N707.76bn, distributable Value Added Tax (VAT) revenue of N233.28bn, Electronic Money Transfer Levy (EMTL) revenue of N24.32bn and Exchange Gain of N24.84bn.

In the fiscal year 2022, FAAC shared a total of N8.25trn in net distributable revenue, up 3.67% y/y from N7.96trn distributed in 2021. Of the 2022 total, the Federal Government received N3.49trn, 2.34% higher than N3.41trn received in 2021 while the State and Local Government received N2.74trn (N2.61trn in 2021) and N2.03trn (1.94trn in 2021) respectively. This was
despite the alleged zero remittance from NNPC Limited. Based on a Cable news report, the NNPC deducted a total N3.3trn for petrol subsidy from January to November 2022.

The zero remittance from NNPC Limited has continued to constrain national revenue. We had noted that by virtue of its commercialisation, NNPC Limited is expected to halt monthly remittances to the federation account and pay dividends to the Federal Government- the current shareholders. We, however, note also 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. 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.

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