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FAAC Payouts Increased by 13% in October – Coronation Merchant Bank Economic Research

The Federation Account Allocation Committee (FAAC) grew by 12.9% m/m or N87.1bn from the previous payout.

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The gross monthly distribution by the Federation Account Allocation Committee (FAAC) to the three tiers of government and public agencies amounted to N760.23bn in October (from September revenue).

This shows an increase of 12.9% m/m or N87.1bn from the previous payout. Based on data from the local media, the increase was mainly from oil and gas royalties.

Meanwhile, petroleum profit tax (PPT) and excise duties recorded marginal increases. However, we learnt that companies’ income tax (CIT), value added tax (VAT) and import duty recorded decreases over the previous month.

The FGN received a total of N294.2bn and state governments received N233.2bn, including N59.9bn representing
the 13% derivation for the oil producing states. The headline figure consists of N502.1bn in gross statutory distribution, N189.9bn from the VAT Pool, and N8.2bn from Electronic Money Transfer Levy (EMTL).

The total deduction for cost of collection was N34.4bn while total deductions for transfers, savings and refunds was N303.5bn. As at October ’22, the average monthly FAAC distribution for the year stood at N722.2bn, an increase from the average of N677.2bn recorded in the corresponding period of 2021.

The committee disclosed that the balance in the Excess Crude Account (ECA) increased slightly from USD470.5m in September ’22 to USD472.5m.

On the back of FAAC allocation, money markets received an inflow of N465.9bn in early November ‘22, representing the net FAAC distribution to state and local governments (a positive for market liquidity). The FGN’s share is directly to the treasury single account.

We understand that the NNPC has made no remittance to the federation account this year largely due to high fuel subsidy costs. The FGN planned to spend N4trn on subsidy payments this year. However, as at July ’22, NNPC had spent N2.04trn on fuel subsidy payments.  This is compared with N1.5trn that was spent on subsidy payments in FY2021.

We note that the FGN plans to end fuel subsidy payments by end-June ’22 and has provided N3.36trn in the proposed 2023 FGN budget, based on the 18-month extension announced early 2022.

To navigate the current fiscal headwinds, effective implementation of the FGN’s strategic revenue initiatives for 2023 is important, to boost non-oil revenue. Additionally, there is a need for the FGN to properly channel its borrowed funds towards well-targeted expenses that would ease supply-chain bottlenecks and support GDP growth.

Recently, the World Bank reaffirmed its readiness to support the FGN in phasing out the fuel subsidy regime, while increasing social assistance for the poor and vulnerable.

Given that the FGN’s revenue is susceptible to economic shocks, the heavy reliance of most states on FAAC payouts to implement their budget is unsustainable. Forward steps towards boosting internally generated revenue include prioritising spending on infrastructure, job creation and human capital development.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Finance

Julius Berger Suspend Work on Lagos-Ibadan Expressway Ahead of December Festival

The suspension of work on the Lagos-Ibadan expressway is necessary to ease the movement of people and goods during the December period. 

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Construction giant Julius Berger has suspended work on the Lagos-Ibadan expressway ahead of the yuletide period, the Federal Ministry of Works and Housing stated in a notice released on Monday.

According to the notice, the suspension is necessary to ease the movement of people and goods during the December period. 

The director of the Federal Ministry of Works for SouthWest Zone, Adedamola Kuti, noted that to ease movement, the barricade causing gridlock on the road would be removed to allow travelers to ply the road with ease.

However, he added that construction on the road will resume by January 2023. 

“The issue is that this is the December period and our people are going to travel. So, we want to relax and work on the road so that people can go for their Christmas holiday, ” he was quoted. 

“During the yuletide season, this is what we have been doing every year. We remove all barriers on the road so that people can have a seamless movement on the express,” he added. 

Investors King understands that the Lagos-Ibadan expressway is one of the busiest road networks in Nigeria. It is expected that the number of travelers that will ply the road will significantly increase during the December period. 

Meanwhile, the director further disclosed that construction on the road will progress faster once work resumes by January 2023.

He noted that work would have entered the dry season which is favourable to construction. 

“Early in January, we will resume work, we are in the dry season, so the work will be faster than what we used to have,” he noted. 

Additionally, he hinted that all being equal, work should have been completed on the road before the end of the dry season. 

“We shall complete it in this dry season and I am sure specifically, all things being equal, before the end of February or early March, before the election or thereabout, we should be able to tidy things up,” he concluded. 

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Loans

FG Plans N3.2bn Loan For Artisanal Miners

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The Federal Government through the Ministry of Mines and Steel Development has announced a cumulative loan of N3.2 billion for artisanal miners across the country.

Announcing the development, the Minister of Mines and Steel Mr Olamilekun Adegbite noted that miners who form a cooperative society will be able to access up to N100 million as loan from the pool of N3.2 billion.

According to the minister, the loans will be given at low-interest rates to boost the diversification of Nigeria’s mining industry. Noting that the first step towards accessing the loan is for miners to form a cooperative society. 

He noted that once the miners come together to form a cooperative, the ministry of mines will give them the appropriate equipment and licensing. 

“Once the miners are registered, they would benefit from all the government incentives like training and free tools,” he said. 

The minister added that alternatively, artisanal miners can join a cooperative society to access the loan at just five percent interest with the opportunity to make repayment within a period of 20 years. 

Adegbite included that the fund, a sum of N3.2 billion has been deposited with the Bank of Industry (BOI) to essentially make the process a swift one. 

He further noted that the ministry has already registered more than a thousand cooperatives. A situation which has brought revenue to the government in terms of royalty. 

” I was told we have more than a thousand cooperatives that have registered with us. Some of them have successfully transitioned from artisanal miners to small-scale miners”. 

“There are still many of them out there but we are winning because we are winning them over with incentives. So, because they are working, they are paying revenue to the government by paying their royalty, so it is a win-win situation,” he said.

Investors King understands that illegal mining is prevalent in Nigeria, especially in rich deposit areas of Zamfara and Osun State.

This has significantly deprived the government a sizable amount of revenue while igniting insecurity around the host communities. 

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Finance

Conditional Cash Transfer: Federal Government to End it This December 2022

FG to end Conditional Cash Transfer (CCT) by the end of December 2022

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Sadiya Farouq

The Federal Government has stated that it will end the Conditional Cash Transfer (CCT) by the end of December 2022.

The conditional cash transfer is one of the federal government’s social intervention schemes to help ameliorate the challenges of poor Nigerians and the most vulnerable. 

According to the head of the National Cash Transfer Office (NCTO), Dr Ibraheem Adam, the government intervention programme which was launched in 2016 has reached a total of 1,940,325 beneficiaries. 

The beneficiaries who are often women, aged persons and the most vulnerable people are drawn from 609 local governments, 6,272 wards, and 48,789 communities. 

Dr Ibrahim, who stated this during an interview with the News Agency of Nigeria (NAN), commended President Muhammadu Buhari and the Minister of Humanitarian Affairs, Disaster Management and Social Development, Hajia Safiya Umar Farouq, noting that the money came in at a time poverty became endemic in the history of Nigeria. 

He added that his office also oversee how the beneficiaries were grouped and mobilised for training on how to save and manage their money.

“We bring them into groups where they do rotational savings and contribution which metamorphosed into cooperative societies which they also own and by doing that they can also empower themselves.”

“The beneficiaries are mentored to properly utilise the knowledge gained in the cause of the capacity building at their doorstep,” he added. 

Investors King understands that the Conditional Cash Transfer (CCT) is ending at a time when the National Bureau of Statistics (NBS) has estimated that about 63 percent of persons living in Nigeria (133 million people) are multidimensionally poor with 72 percent living on the rural communities. 

The World Bank had also estimated that 4 in 10 Nigerians live below the national poverty line

A larger percentage of the beneficiaries of conditional cash transfers live in rural areas. The end of the conditional cash transfer could aggravate the financial condition of some of the most vulnerable. 

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