April 28, 2023/FBNQuest

The gross monthly distribution by the Federation Account Allocation Committee (FAAC) to the three tiers of government amounted to NGN715bn (USD1.6bn) in April (from March revenue). The gross payout for April represents a decrease of c.NGN8bn from the previous month’s payout. The latest month’s payout also marks the third consecutive month of decline in revenue disbursements to the three tiers of government since the beginning of the year. Compared with the previous month, the modest drop in revenue was primarily due to a -10% m/m decrease in value-added-tax (VAT) to NGN203bn. In contrast, distributable statutory revenue increased by NGN131bn or+31% m/m to NGN498bn.

The m/m increases in statutory revenue were mostly driven by higher collections from companies’ income tax and petroleum profit tax, oil and gas royalties, import and excise duties.

Of the distributed sum, the federal government (FG) received NGN276bn, +3% or NGN7bn higher than it received the previous month.

However, disbursements to the 36 states of the federation (ex.-13% derivation), and local governments decreased by NGN5bn and NGN3bn to NGN232bn and NGN171bn respectively.

Also, the 13% derivation allocation to the relevant oil-producing states declined by NGN8bn to NGN35bn.

The current revenue sharing arrangement specifies a higher allocation of statutory revenue, (around half to the FG), while state governments and local governments are entitled to 50% and 35% of VAT revenues respectively.

Consequently, the reduced payments made to the state governments and local governments relative to the FG were due to lower VAT revenues and greater statutory revenues in April than in the preceding month.

On a year-to-date basis, the total distributed revenue to the three tiers of government between January and March ’23 increased by 10% y/y to NGN2.2trn.

Of the total distribution, NGN31bn was spent on collection costs, while the total allocation for transfers, refunds and consultancy fees amounted to NGN127bn.