In Africa’s most populous nation, the maxim, the more you look, the less you see, can often be quite true.
As oil prices collapsed and demand plummeted, 2020 was meant to be the year, the finances of the three tiers of government in Nigeria were expected to collapse. Some even predicted that come July, states will be unable to pay salaries or even meet the small change needs of their governors.
Not so it would seem. The gross monthly payout by the Federation Account Allocation Committee (FAAC) to the three tiers of government and eligible agencies amounted to N651bn (US$1.68bn) in July (from June revenue) and the party lights are all not going out soon.
According to analysts at FBNQuest, his was actually an increase of N104bn on the previous month.
In a note Monday, the analysts said, “from the sparse coverage in the local media we learnt that receipts from VAT, companies’ income tax, oil and gas royalties, and import and excise duty were significantly higher on the month, while those from petroleum profit tax were lower.
“State governments received a total of N214bn including the 13% derivation formula for the oil producers. “ This is a bumper harvest in even in good times.
This is news is critical and it might show how Nigeria could be fairing better than had been forecast which is good news if your business dealings feature transactions with state governments.
Here is the breakdown.
· The receipts in the federation account amounted to N696bn, consisting of the gross statutory distribution of N524bn, VAT Pool of N129bn and an exchange-rate gain of N43bn. The tiers and agencies received N651bn while N45bn was transferred to the excess non-oil revenue account.
· There has been an encouraging rise in VAT receipts from N94bn in April to N129bn in June. The hike in the standard rate from the start of February will have been a factor. Nigeria’s emergence from partial lockdown will have helped too, not that we are calling a turnaround in household consumption.
· The payment to the states again fell short of their needs. In 2018 they spent an average of N371bn per month (N271bn and N100bn on recurrent and capital items). A few states, led by Lagos, generate substantial internal revenue but most depend upon the inadequate monthly FAAC distribution. Further, their access to borrowing has been restricted by the FGN.
We had expected a sharp reduction in this month’s payout due to a briefing by a prominent state governor and to the far lower oil prices that prevailed in March and April, bearing in mind that Nigerian crude is generally sold three months forward.
