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FAAC : How Delta,A/Ibom, Lagos, Rivers Got Lion Share

The N780bn shared by Federal Account and Allocation Committee (FAAC) among the three tiers of government hits a record-high for 2020 in April, even as disbursements in the prior month fell below the estimated minimum threshold for the federal and state governments to meet their obligations amid the pandemic crisis.

The amount is 34% higher than what was disbursed in March, and the highest in at least seven months. A halt in the decline of FAAC brings relief to Nigeria’s 36 states and FCT which rely on revenue shared for around 80% of their monthly income on the average.

The FAAC disbursement is augmented by Internally Generated Revenue (IGR) to run government discharge such obligations as salary payments. Under the FAAC arrangement, revenue generated from sales of crude oil, Value Added Tax (VAT), corporate tax, etc. are shared among all three tiers of government based on a formula.

FG takes 52.68%, states share 26.72% and the local governments take 20.60%, with 13% derivation revenue for oil producing states, but the dwindling oil revenue occasioned by the Russia/Saudi Arabia oil price war and Covid-19 crisis has had a direct impact on the FAAC receipts.

Finance Minister Zainab Ahmed in April said that monthly FAAC receipts must average at least N650 billion for the federal and state governments to meet their current obligations.

The amount disbursed in April but generated in March comprised of N478.18bn from the Statutory Account, N119.50bn from Excess Oil Revenue, N120.27bn from Valued Added Tax (VAT) and N62.98bn from Exchange Gain Differences.

Federal Government received a total of N264.33bn from the N780.93bn. States received a total of N181.49bn and Local Governments received N135.95bn.

The sum of N54.29bn was shared among the oil producing states as 13% derivation fund. Revenue generating agencies such as Nigeria Customs Service (NCS), Federal Inland Revenue Service (FIRS) and Department of Petroleum Resources (DPR) received N6.09bn, N10.20bn and N5.74bn respectively as cost of revenue collections.

According to the Nigerian Bureau of Statistics, further breakdown of revenue allocation distribution to the Federal Government of Nigeria (FGN) revealed that the sum of N202.94bn was disbursed to the FGN consolidated revenue account; N4.70bn shared as share of derivation and ecology; N2.35bn as stabilization fund; N7.89bn for the development of natural resources; and N5.78bn to the Federal Capital Territory (FCT) Abuja.

The improvements in monthly disbursement notwithstanding, concerns about the fiscal health of states remain on the front burner since Nigeria’s revenue from oil sales is expected to fall 80% to N1.1trn in 2020.

In its monthly bulletin, the Financial Derivatives Company (FDC) noted that FAAC for the month of May fell 22.37% to N606.2bn on sharp declines in oil revenues, petroleum profit tax, import and export duties, corporate income tax and VAT.

June FAAC  is projected to drop to N500bn, a further decline below the minimum disbursement for states and FG to support their monthly expenditures.

Already several states in the country including the FG have cut their 2020 budgets in the light of new realities caused partly by COVID-19 lockdowns across the world and an oil price war between March and April.

The decision of OPEC+ to cut oil production by around a tenth of global supply has supported oil prices. Brent is currently trading more than $10 above Nigeria’s new budget benchmark of $30 per barrel.

The NBS breakdown of the federal allocation to states and LGAs between January and April 2020 is as follows:

1 Delta: ₦87.26b
2 Akwa Ibom: ₦74.33b
3 Lagos: ₦70.83b
4 Rivers: ₦70.20b
5 Kano: ₦55.73b
6 Bayelsa: ₦54.03b
7 Katsina: ₦41.82b
8 Kaduna: ₦39.25b
9 Oyo: ₦37.46b
10 Borno: ₦36.85b
11 Jigawa: ₦34.73b
12 Niger: ₦34.34b
13 Imo: ₦33.79b
14 Sokoto: ₦32.20b
15 Edo: ₦31.44b
16 Bauchi: ₦30.79b
17 Benue: ₦30.59b
18 Kebbi: ₦30.07b
19 Anambra: ₦29.95b
20 Kogi: ₦28.53b
21 Adamawa: ₦28.47b
22 Enugu: ₦27.87b
23 FCT: ₦27.53b
24 Ondo: ₦27.50b
25 Yobe: ₦27.29b
26 Abia: ₦26.54b
27 Taraba: ₦25.34b
28 Osun: ₦24.09b
29 Ogun: ₦23.60b
30 Plateau: ₦23.52b
31 Kwara: ₦23.49b
32 Zamfara: ₦23.48b
33 Ebonyi: ₦22.58b
34 Nasarawa: ₦22.47bb
35 Cross River: ₦21.99
36 Ekiti: ₦21.83b
37 Gombe: ₦20.35b

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