February 27, 2024/FBNQuest Research
The gross monthly distribution by the Federation Allocation Committee (FAAC) to the three tiers of the government amounted to NGN1.2trn (USD816.8m) in February (from January revenue). The disbursement represents a slight increase of +2% m/m from the previous month’s gross payout. Compared with the previous month, the higher revenue was primarily due to an increase of NGN100bn (or +28%) in statutory revenue to NGN463bn.
However, all other revenue segments decreased m/m.
Specifically, revenue from value-added-tax fell by -15% m/m to NGN292bn, while electronic money transfer fees decreased -11% m/m to NGN16bn.
Similarly, the exchange rate gain of NGN279bn, was also lower than the NGN288bn received from the previous month.
The federal government’s (FG) share of revenue disbursements amounted to NGN407bn, higher than the NGN384bn distributed the previous month.
Conversely, allocations to the 36 states of the federation (ex.13% derivation for oil-producing states) and local government totalled NGN379bn and NGN279bn respectively, representing m/m declines of 5% m/m and 4% m/m respectively.
The lower revenue distributions to the state governments continue to highlight the inadequacy of revenue relative to their total expenditure, particularly considering various measures being rolled out by state governments to cushion the effects of the rising cost of living situation being witnessed across the country.
However, the 13% derivation allocation for oil-producing states increased by almost NGN27bn to NGN85bn during the month.
Although figures were not provided, the communiqué noted higher revenue receipts from petroleum profit tax, oil and gas royalties, import duty and companies’ income tax relative to the previous month.
Looking ahead, we expect gross federally collected revenue to receive a boost (in naira terms) from the continued depreciation of the naira.
Nonetheless, the FG and the states will continue to face significant fiscal pressure due to their rising expenditure profiles, and a high debt service burden. We estimate the FG’s 2024 fiscal deficit at c.4.7% of GDP, vs. the budget’s projection of 3.9%.
