Suboptimal Subnational Finances, Gross Monthly FAAC Distribution Amounted to N681bn in April 2021


The gross monthly distribution by the Federation Account Allocation Committee (FAAC) to the three tiers of government and public agencies amounted to NGN681bn (USD1.67bn) in April (from March revenue).

We learnt from the patchy coverage in the local media that the committee noted a healthy increase in the take from company income tax, VAT, oil and gas royalties, and import and excise duty, and a sharp fall in the collection of petroleum profit tax. State governments received a total of NGN219bn in the distribution, which included NGN40bn for those states that benefit from the 13% derivation formula

The headline figure consists of NGN467bn in gross statutory distribution, NGN182bn from the VAT Pool, a small exchange-rate adjustment and an “augmentation” of NGN30bn. There has been no official explanation why the committee chose to top up the distribution with this last payment. It is clear, however, that recent committee meetings have been fractious.

Costs, refunds and transfers consumed NGN88bn of the total distribution.

Average monthly total distributions have fallen from NGN710bn in 2018 to NGN636bn last year, and have now settled on a plateau.

Current levels are far short of states’ aggregate needs. Data on subnational finances are patchy but we see from CBN statistics that their total spending averaged NGN351bn in 2018 and NGN396bn in 2019 (ie almost twice what they have just received).

A small number of states, led by Lagos, can still meet their spending commitments at this lower level of FAAC payout. Lagos State has reported that internally generated revenue represented 47% of its total revenue in H1 ’20. ‘The ratio was earlier higher’.

On Wednesday a FAAC inflow of NGN303bn boosted market liquidity. This would have been the share of the state and local governments since the FGN’s is credited to the treasury single account.

Our more alert readers will have noticed that the chart only runs through to the revenue collected in the federation account in January (distributed in February).

The explanation is that we have not seen the communique from the FAAC committee after its meeting in March, either in the local media or on any official website.

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