November 22, 2024/CSL Research
The Federation Account Allocation Committee (FAAC), at its November 2024 meeting held in
Bauchi shared a total sum of N1.41 trillion among the Federal Government (N433.02bn), States
(N490.69bn), and Local Government Councils (N355.6bn). Additionally, oil-producing states
received N132.4bn as derivation fund (13% of mineral revenue). This total represents a 9.5%
increase from the previous month’s allocation of N1.29 trillion. The N1.41 trillion total distributable revenue comprised distributable statutory revenue of N206.319bn, distributable Value Added Tax (VAT) revenue of N622.312 bn, Electronic Money Transfer Levy (EMTL) revenue of N17.11bn and Exchange Difference revenue of N566bn. The balance in the Excess Crude Account was US$473,745.
Crude oil sales, which are the primary source of funds for the statutory account, remain the largest contributor to the FAAC purse. Despite a relatively stable crude oil price averaging around US$86.8/b over the past 34 months, crude oil production has suffered significant setbacks due to theft, frequent terminal shutdowns, vandalism, and poor maintenance, which have severely impacted output. Monthly FAAC disbursements have averaged around N1.14trn since June of last year. At the state level, most states are heavily reliant on FAAC allocations, with over 60% of their revenue coming from this source. This dependency means that any significant reduction in FAAC disbursements would severely impact the ability of these states to finance both recurrent and capital projects, especially given the increased financial burden from the recent rise in the minimum wage which are they expected to comply with.
Recently, the global price of crude oil has dropped moderately, averaging US$73.5/b in November 2024. Based on the Medium-Term Expenditure Framework (MTEF) & Fiscal Strategy Paper (FSP), the average oil price forecasts in the medium term are US$78.15/b, US$76.17/b, and US$75.33/b for 2025, 2026 and 2027 respectively. Looking ahead, Donald Trump’s presidency, particularly if it aligns with his past policies, could have a significant impact on global oil prices due to his focus on energy independence and deregulation. In our view, while a Trump presidency might initially suppress oil prices due to increased supply, geopolitical uncertainties and demand fluctuations could introduce volatility. Countries heavily reliant on oil revenues, like Nigeria, could face fiscal pressures under sustained low prices.
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