Rebound in FAAC Payout for July

The latest gross monthly distribution by the Federation Account Allocation Committee (FAAC) to the three tiers of government and public agencies amounted to N802.4bn in July (from June revenue).

This was an increase of 18% or N121.6bn from June’s payout and 14.7% higher than the payout recorded in January ’22. YTD, the average monthly FAAC distribution is N690.7bn. This is an improvement when compared with the average of N649.5bn and N642.1 recorded in the corresponding period of 2021 and 2020 respectively.

According to the local media, companies income tax (CIT), petroleum profit tax (PPT), oil and gas royalties and import duty recorded significant increases over the previous month, while value added tax (VAT)and excise duties declined.

From the FAAC payout in July, the FGN received a total of N321.9bn while state governments received N245.4bn, including N52.8bn representing the 13% derivation for the oil producing states. In addition, local government councils received N182.3bn.

The headline figure consisted of N608.6bn in gross statutory distribution. This was an increase of 58.1% when compared with the previous month and 20% when compared to the amount recorded in January ’22. Additionally, N193.8bn came in from the VAT Pool.

It was -2.4% lower than the amount recorded for June ’22 (N198.5bn), but 3.4% higher than the amount recorded in January ’22 (N187.4bn). In July, the total deductions for cost of collection was N44.6bn and the total deductions for statutory transfers, refunds and savings was N373.2bn.

The committee put the balance in the Excess Crude Account (ECA) at USD376,655. This is compared with USD61m recorded in July ’21.The drawdown can be attributed to an advance payment for the purchase of new offshore patrol vessels for the Nigerian Navy.

It is important to highlight that the Nigerian National Petroleum Company Limited (NNPC Ltd) has not made any remittance to the federation account in 2022. This is largely due to low oil production levels and high fuel subsidy costs. The NNPC has spent N1.5trn (USD3.5bn), on PMS subsidies in H1 ’22. The FGN estimates that N4trn would be spent on subsidy in 2022 compared with N1.5trn spent in 2021.

Going forward we expect the fiscal strain across states to remain unchanged. A few states, led by Lagos, generate substantial internal revenue, and can still meet their spending commitments, including capital items. However, for most states that depend solely on the monthly FAAC distribution, the prospects are bleak.