- FAAC Payout Drops by N90b in October
Total payout by the Federation Account Allocation Committee (FAAC) to the three tiers of government decreased by N90 billion in October, from N420 billion in September, FBNQuest has said.
In a report, FBN Quest, the investment and research arm of FBN Holdings, said crude oil price crash hit the FAAC cash, leading to the drop in the allocation and the inability of many states to honour recurrent obligations, including salaries and pension liabilities, as well as capital obligations.
FBNQuest said the statutory distribution of N251 billion was supplemented by excess petroleum tax payments of N63 billion, an exchange-rate gain of N41 billion, the regular Nigeria National Petroleum Corporation (NNPC) refund of N6 billion and an undisclosed amount from Value Added Tax (VAT).
The report titled: ‘A marked decline in the FAAC payout’, said the figure fell below the forecast pro rata monthly average of N477 billion in the 2016 budget, which projects the net distribution from the Federation Account and the VAT pool combined at N5.72 trillion, for the first time in four months.
It said the three previous distributions were boosted by the impact of the Central Bank of Nigeria (CBN) ‘devaluation’ on June 20, adding that both petroleum receipts based on the US dollar price and customs revenues benefited from the adjustment.
The Central Bank of Nigeria (CBN) had abandoned a 16-month currency peg on June 20 and adopted flexible foreign exchange policy, which gave the naira greater flexibility to adjust against the dollar. The ‘devaluation’ of the naira was meant to provide the much-desired stimulus and foreign portfolio investment needed to boost investments in the capital market.
The drop in FACC revenues was also caused by the state of force majeure at the Bonny terminal and the subsisting force majeure at the Forcados terminal as well as the drop in non-mineral revenue in September.
However, the Excess Crude Account (ECA) balance stood at $2.45 billion and compromised part of official reserves, which amounted to $23.91 billion as at October 21.
Analysts insist the oil price crisis resulted from drastic, adverse structural shift in the global market demand and supply of oil and gas. International market price of oil dropped by about 43 per cent from an average of about $100.35 for the 12 months of 2014 to an average of $57.20 for the first six months of last year and closed at $51 on Monday.