States get surprise rise in July allocation

The gross monthly distribution by the Federation Account Allocation Committee (FAAC) to the three tiers of government and public agencies amounted to N733bn (USD1.78bn) in July according to a report by FBNQuest.

This represents a 21 percent (N127bn) increase compared to about N606 billion payout recorded in June 2021.

Responding to BusinessDay on this, Ayodele Akinwunmi, relationship manager, corporate banking at FSDH Merchant Bank Limited said oil price increased and that may be partly responsible for it.

He said this means more revenue for all the levels of government to discharge their responsibilities.

“From thin coverage in the local media, we learnt that the take from petroleum profit tax (PPT), companies’ income tax, import and excise duty, and oil and gas royalties recorded substantial increases over the previous month, while receipt from VAT was significantly lower.

State governments received a total of N143bn, including N51bn representing the 13 percent derivation for the few oil-producing states, analysts at FBNQuest said.

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The report noted that the headline figure was made up of N586bn in gross statutory distribution, N143bn from the VAT Pool, and foreign exchange adjustments totalling N4bn.

The committee put the balance in the Excess Crude Account (ECA) at USD61m. Of the total distribution, N87bn was consumed by a combination of costs, transfers and unspecified refunds.

The average monthly allocation amounted to N647bn in H1 ’21, compared with N710bn in 2018, N685bn in 2019 and N636bn last year.

The allocation to the states again fell short of their aggregate needs. In 2018 they spent an average of N371bn per month (N271bn on recurrent and N100bn on capital items) and N396bn in 2019.

A few states, led by Lagos, generate substantial internal revenue and can still meet their spending commitments, including capital items, at these reduced levels of FAAC pay-out.

For most states that depend solely on the inadequate monthly FAAC distribution, the prospects are bleak: at a National Executive Council (NEC) meeting last week, the minister of finance, budget and national planning disclosed that deductions of the budget support the facility from state governments will now commence from July.

The federal government had extended the facility to states in 2017 to cushion the impact of dwindling resources and help meet their various obligations.

Hope Moses-Ashike

Hope Moses-Ashike is an Associate Editor, Banking and Finance, with more than a decade of experience reporting on Nigeria’s financial system and broader economy. She closely tracks market movements, monetary policy decisions, company disclosures, regulatory actions, economic indicators, and global developments, and interprets what they mean for businesses, investors, policymakers, and households. Her reporting helps readers understand complex issues such as inflation trends, foreign exchange market dynamics, interest rate decisions, bank performance, and investment risks. She also covers major international events and periodically travels to Washington, D.C., to report on the World Bank/IMF Spring and Annual Meetings. Her dedication to financial journalism has earned her multiple recognitions and invitations to high-level professional development programmes. She is an alumna of the International Visitors Leadership Programme (IVLP) in the United States and holds an Advanced Financial Journalism Certificate from the Press Association Training in London, UK. Her other notable achievements include completing the Lagos Business School CMC Programme, the Bloomberg Media Africa Initiative Programme, and a Master Class in Journalism at Rhodes University in South Africa.