FG, States share N619bn in January 2021; records marginal pick-up in the FAAC payout

• States payout still short of spending for pensions and salaries in Osun, Cross River, Plateau states

Charles Abuede

Recent data obtained from the National Bureau of Statistics (NBS), Nigeria has shown that the gross monthly distribution by the Federation Account Allocation Committee (FAAC) to the three government tiers and eligible agencies totalled N619 billion or $1.57 billion in January 2020 from December revenue. This was N18 billion above the previous month’s payout of N601.11 billion.

According to the report published by the Abuja-based statistics office on Tuesday, the headline figure is made up of the gross statutory distribution of N437 billion, the value-added tax (VAT) pool of N171 billion and foreign exchange adjustments totalling N11 billion. A cursory analysis of the data portends that the take from companies’ income tax, and oil and gas royalties was substantially higher, that the distribution of the value-added tax was higher and that the collection of petroleum profit tax (PPT) was much lower. State governments received a total of N210 billion including 13 per cent derivation for the few oil-producing states, the highest payout for three months after the N222 billion from September revenue.

Furthermore, this latest payout to states falls far short of their spending, which averaged N351 billion per month in 2018 and N396 billion last year. It would not even have covered their salaries and pensions in aggregate. Consequently, the December revenue shared in January saw states such as Osun, Cross River and Plateau on the log as the least paid sub-national governments with N2.69 billion, N2.74 billion and N2.94 billion respectively as Taraba and Ogun States got N3.29 billion and N3.32 billion apiece. On the flip side with the highest payout during the month of January, the oil-producing states such as Delta, Rivers, Akwa-Ibom and Bayelsa states lead the packs with N13.45 billion, N11.43 billion, N10.32 billion and N7.5 billion respectively as joined the rank with N20.74 billion payout during the period under review.

However the varying amounts paid out, analysts have opined that a small number of states, led by Lagos, can meet all their obligations at these reduced levels of FAAC distribution because they collect substantial sums of internally generated revenue.  Several are taking steps to create future revenue streams, an example being the allocation of land for the planting of oil palm in Edo State.

Elsewhere, the data as analyzed has revealed that the trend in total distributions has been downward, from an average of N710 billion in 2018 to N685 billion in 2019 and N636 billion last year. The crude oil price has started to pick up in the past three months but there is a need to remember that production has fallen sharply in line with or towards the OPEC quota which currently stands around 1.52 million barrel per day could be regarded as a factor. Also, there is the need to remember the three months lapse between the initiation of a crude oil sale contract and the remittance of the sale proceeds to the federation account.

In contrast, growing VAT collection has been encouraging when household spending has been squeezed resulting from rising prices of domestic goods and services. The hike in the standard rate of VAT in February 2020 from 5.0 per cent to 7.5 per cent is a factor, to which improved coverage is added. While the rise in mobile money and financial inclusion extends the tax net, VAT collection is highly concentrated. Meanwhile, data from the National Bureau of Statistics show that just four segments produced close to 60 per cent of collection in 2019 which are: other manufacturing, professional services, commercial and trading operations, and state ministries and parastatals. The increase in collection amounted to 8.9 per cent month on month and 90.0 per cent year on year in December.

Further breakdown of revenue allocation distribution to the Federal Government of Nigeria (FGN) revealed that the sum of N146.33 billion was disbursed to the FGN consolidated revenue account; N3.69 billion shared as a share of derivation and ecology; N1.85 billion as stabilization fund; N6.20 billion for the development of natural resources; and N5.22 billion to the Federal Capital Territory (FCT) Abuja. Also, revenue-generating agencies such as Nigeria Customs Service (NCS), Federal Inland Revenue Service (FIRS) and Department of Petroleum Resources (DPR) received N6.99 billion, N10.43 billion and N6.36 billion respectively as cost of revenue collections.