October 26, 2023/FBNQuest Research

The gross monthly distribution by the Federation Account Allocation Committee (FAAC) to the three tiers of the government amounted to NGN903bn (USD1.1bn) in October (from September revenue). The disbursements represent an 18% reduction compared with the amount shared in September. The decrease in revenue was mainly due to the absence of revenue augmentation that contributed around NGN177bn in the previous month. Additionally, excluding statutory revenue, which increased by 18% m/m to NGN423bn, all other revenue verticals decreased m/m.

Specifically, revenue from value-added-tax (VAT) dropped -12% m/m to NGN283bn, while electronic money transfer fees decreased -22% m/m to NGN11bn.

Although the fiscal purse benefited from an exchange rate gain of NGN187bn, the figure is also lower than the NGN230bn from the previous month.

In the latest round of revenue disbursements, the federal government received NGN321bn, about NGN111bn lower than it received the previous month.

Disbursements to the 36 states (ex-the 13% derivation fund), and local governments fell by NGN74bn and NGN56bn to NGN287bn and NGN211bn, respectively.

In contrast, the 13% derivation allocation for oil-producing states increased by almost NGN44bn to NGN85bn.

The m/m decline in revenue once again highlights the narrow fiscal space available for the government to manoeuvre.

For context, Nigeria’s federally collected revenue-to-GDP ratio, which stood at roughly 6% in 2022, is currently one of the lowest in the world, well below the global average of 25.9%, according to World Bank data.

The government aims to increase this ratio to 18% in the coming years, but there is still a long way to go before that goal can be achieved.

Moreover, the continuation of fuel subsidies, which have been reinstated, will continue to be a significant burden on the country’s fiscal space.