January 25, 2024/CSL Research
A communique issued by the Federal Account Allocation Committee (FAAC) in January 2024 indicated that a total sum of N1.13trn was shared by the Federal Government, States and Local Government Councils. The total sum, which is 3.5% higher than the previous month’s distributable revenue of N1.09trn comprised; distributable statutory revenue of N363.19bn, distributable Value Added Tax (VAT) revenue of N458.62bn, Electronic Money Transfer Levy (EMTL) revenue of N17.86bn, exchange difference revenue of N287.74bn. 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.
We anticipate an enhancement in oil production to reach 1.56 million barrels per day (mbpd) in 2024, from an average of 1.46mbpd in 2023, driven by the government’s proactive initiatives to reactivate inactive oil terminals and revive dormant oil wells. According to the committee, Company Income Tax (CIT), excise duty, Petroleum Profit Tax (PPT), VAT and EMTL increased significantly in December while oil and gas royalties saw dipped significantly while noting that the balance in the excess crude account stands at US$473,754m.
Many States rely solely on FAAC allocations to run their states with very minimal Internally Generated Revenue (IGR) or Foreign Direct Investments (FDIs). 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.
News reports quoting the commissioner for Economic Planning and Budget, Ope George say the Lagos state government has reported an Internally Generated Revenue (IGR) of c.N400 billion as of June 2023. This compares with N651.14 billion reported for FY 2022.
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