December 4, 2023/CSL Research
A communique issued by the FAAC at its November 2023 meeting indicated that a total sum of N906.96bn was shared by the Federal Government, States and Local Government Councils. The total sum, which is o.4% higher than the previous month’s distributable revenue of N903.48bn comprised; distributable statutory revenue of N305.07bn, distributable Value Added Tax (VAT) revenue of N323.45bn, Electronic Money Transfer Levy (EMTL) revenue of N15.55bn, exchange difference revenue of N202.89bn and augmentation of N60bn.
FAAC allocations principally originate from crude oil sales proceeds to the federal account. Despite the recent stability in the price of crude oil, massive crude oil theft and recurrent shut-ins at various crude oil pipeline installations, triggered by vandalism and lack of maintenance, have led to a severe decline in crude oil production.
Based on data from the National Upstream Petroleum Regulatory Commission (NUPRC), Nigeria’s oil production declined marginally to 1.56 million barrels per day (mbpd) in October 2023, from 1.57mbp recorded in September. In Q3, average crude oil production (with condensates) was 1.43mbpd, c.79.5% of its 1.8mbpd OPEC quota in Q3 2023.
When compared with the country’s budget benchmark, average crude oil production in Q3 2023 came to c.84.6% of the 1.69mbpd in the 2023 budget. We had earlier believed that the removal of the fuel subsidy would boost FAAC allocations significantly. However, there are indications that the subsidy has been subtly reintroduced, though the amount spent on subsidy should still be significantly lower. Subsidy deductions by the NNPC have previously significantly reduced the amount shared by FAAC.
The Federal Government received a total sum of N323.36bn, the State Governments received N307.72bn and the Local Governments received N225.2bn. A total sum of N50.67bn (13% of mineral revenue) was shared by the relevant States as derivation revenue.
Many States rely solely on FAAC allocations to run their states with very minimal Internally Generated Revenue (IGR). Based on FY 2022 data from the National Bureau of Statistics (NBS), states like Lagos, Rivers, and FCT had comparatively limited dependence on federally distributed revenue for their operations. In contrast, states like Kebbi, Taraba, Yobe and Bayelsa need to work harder to grow IGR considering the size of their operating expenses.
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