The gross monthly distribution by the Federation Account Allocation Committee (FAAC) to the three tiers of government and public agencies amounted to NGN761bn (USD1.85bn) in August (from July revenue).
This was as a result of an increase of NGN28bn on the previous payout, and the second consecutive monthly increase. From scanty coverage in the local media, we learnt that the take from petroleum profit tax (PPT), companies’ income tax, and oil and gas royalties recorded substantial decreases over the previous month.
While receipts from VAT, and import and excise duty decreased marginally. State governments received a total of NGN273bn, including NGN50bn, representing the 13% derivation for the few oil-producing states.
The headline figure is made up of NGN618bn in gross statutory distribution, NGN141bn from the VAT pool, and fx adjustments totalling NGN2bn.
The committee put the balance in the Excess Crude Account (ECA) at USD61m,of the total distribution, NGN64bn was consumed by a combination of costs, transfers and unspecified refunds.
Average monthly allocation for January through July ’21 amounted to NGN663bn, compared with NGN710bn in 2018, NGN685bn in 2019 and NGN636bn last year.
The allocation to the states again fell short of their aggregate needs. In 2018 they spent an average of NGN371bn per month (NGN271bn on recurrent and NGN100bn on capital items) and NGN396bn in 2019.
Despite the revenue shortfall, a few states, led by Lagos, generate substantial internal revenue and can still meet their spending commitments, including capital items.
A recent Federal High Court ruling granted Rivers State and, by extension, other state governments the right to collect VAT. An obvious implication of this is that the few high performing states will record significant revenue increases, while the rest of the states will suffer more revenue declines.
Read also: NBS: FG generated N472bn company income tax in Q2 2021 — 20% increase from first quarter
While we understand that the FIRS has appealed the judgement, we see this development as a wake-up call to states that depend solely on the FAAC allocation to look inward for means to generate more revenue.
