November 24, 2023/FBNQuest Research
According to the most recent report on the federation’s revenue distribution, the Federation Account Allocation Committee’s (FAAC) monthly allocations to the three tiers of government amounted to NGN907bn (USD1.1bn) in November 2023 (from October 2023 revenue). The gross payout in October represents a slight increase of NGN4bn (or +0.4% m/m) over the previous month’s payout. Underscoring the m/m increase in the revenue distributed was the contribution of NGN60bn from revenue augmentation which was excluded in the previous month’s payout.
The federation’s account disbursement in October was also supported by increases of 45% m/m and 14% m/m in electronic money transfer fees and value-added-tax to NGN16bn and 324bn, respectively.
Additionally, the exchange rate gain for the month also saw an increase of 9% m/m to NGN203bn, or NGN16bn higher than the preceding month’s gain of NGN187bn.
Except for a brief decline in September’s revenue disbursement, the government’s fiscal purse has continued to expand since the CBN’s decision to float the naira in Jun ’23, resulting in the downward adjustment of the naira.
Statutory revenue, which accounted for about 34% of the distributed sum, decreased markedly by -28% m/m to NGN305bn.
The lower statutory receipts m/m can be attributed to decreased revenue contributions from excise duties, companies’ income tax and oil and gas royalties.
Of the distributed sum, the federal government’s (FG) share increased slightly by NGN2bn to NGN323bn.
Relative to the previous month, disbursements to the 36 states of the federation (ex.13% derivation for oil-producing states) and local governments both increased by 7% m/m to NGN308bn and NGN225bn, respectively.
Looking ahead, we expect to see further expansion in FAAC disbursements in the coming months. However, we anticipate that the continued rise in debt service costs, inflationary pressures from increased government wage bills, and the reinstatement of fuel subsidies will exert additional pressure on the fiscal purse.
