February 6, 2024/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 January ’24 (from December ’23 revenue) compared to N1.08bn recorded in the previous month This shows a 4.6% m/m increase from the previous payout and can be partly attributed to increases in company income tax (CIT), excise duty, petroleum profit tax (PPT), value added tax (VAT), and electronic money transfer levy (EMTL). Meanwhile, oil and gas royalties, import duty, and gas royalties recorded decline marginally.
A breakdown of the distributable revenue shows that the FGN received a total of N383.8bn, state governments were apportioned N396.6bn, including N57.92bn representing a 13% derivation revenue for the oil-producing states and the local governments received N288.9. The average monthly FAAC distribution increased by 20% y/y to N885.8bn in 2023 from N738.5bn.
The committee disclosed that the balance in the Excess Crude Account (ECA) remained unchanged from the previous month at USD473.7m. In a separate report by the National Bureau of Statistics (NBS), VAT collections grew by 51.6% y/y and 21.3% q/q to N948.1bn in Q3 ’23 compared with N781.4bn recorded in Q2 ’23. The increase reflects improved collection processes by the FGN.
The top three contributors by sectors in Q3 ‘23 include the manufacturing (accounting for 26.5%), ICT (accounting for 19.0%), and finance and insurance (representing 12.3%). To reduce overdependence on FAAC payouts and boost internally generated revenue, state governments need to enhance tax administration through modern systems and audits. Investing in critical infrastructure to attract businesses is also critical. Public-Private Partnerships (PPPs) can be explored for infrastructure projects, and tourism development initiatives can be promoted. Good governance, transparency, and accountability in revenue collection processes are vital for building public trust and ensuring compliance.
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