October 6, 2023/Coronation Research
The gross monthly distribution by the Federation Account Allocation Committee (FAAC) to the three tiers of government and public agencies amounted to N1.1trn in September ’23 (from August ’23 revenue) compared to N966bn recorded in the previous month.
This is the highest payout recorded this year and can be partly attributed to increases in Value Added Tax (VAT), import and excise duties, and Electronic Money Transfer Levy (EMTL). Meanwhile, Petroleum Profit Tax (PPT), Company Income Tax (CIT), and gas royalties recorded declines.
The headline figure consists of N357.4bn in gross statutory distribution, N321.9bn from the VAT pool, and N14.1bn from the Electronic Money Transfer Levy (EMTL). The total deduction for the cost of collection was N58.8bn.
The FGN received N431.2bn, state governments collectively received N361.2bn while the local government councils received N266.5bn. Oil-producing states received N26.5bn, representing a 13% derivation revenue.
The FGN recently announced a temporary suspension of VAT on diesel products (until March 2024). This is targeted at cushioning the impact of the fx unification on consumer pockets. This suspension could influence VAT revenue and by extension, FAAC payouts within the six-month timeframe.
In a separate report by the National Bureau of Statistics (NBS), VAT collections grew by 30.2% y/y and 10.1 m/m to N781.4bn in Q2 ’23 compared with N709.6bn recorded in Q1 ’23. The increase reflects improved collection processes by the FGN.
FAAC distributions averaged N670.7bn in 2021, and N738.5bn in 2022. We note that at end-September ’23, the average stood at N825.3bn. This improvement can be partly attributed to fx gains. Notably, the exchange difference revenue stood at N229.6bn in September (from August’s revenue).
Improved disbursements from FAAC ought to provide funding for critical sectors of the economy and by extension spur economic growth. However, it is pertinent to note that it could further exacerbate inflationary pressure (headline inflation, currently at 25.80% y/y).
The balance in the Excess Crude Oil Account (ECA) as at end-September ‘23 stood at N473,754.6.
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