The total gross monthly payout by the Federation Account Allocation Committee (FAAC) to the three tiers of government amounted to N620bn (US$2.02bn) in March (from February revenue). It represents a decline of N40bn on the month. The official commentary noted a healthy increase in receipts from petroleum profit tax and a small rise in payments of companies’ income tax. At the same, revenue from VAT, oil royalties, and import and excise duty were all lower than the previous month. As a footnote, the commentary said that the balance in the excess crude account had again declined to US$183m.
- The inescapable conclusion from the data is that, with the exception of peaks recorded in June and November, tax collection is pitifully low. Other than those who have their tax payments deducted at source, it is often a case of “can pay, won’t pay”.
- In the short term, the response of the authorities should be to tighten enforcement, impose penalties and, as we have often argued, increase tax rates such as for VAT. A core element of enforcement is the pooling of information between ministries, departments and agencies.
- Distributions on this scale highlight the fact that many state governments are not financially viable. In aggregate they received N221bn this time (including the 13% derivation for the lucky few), which matched their average monthly spending in 2017 solely on recurrent items (notably salaries).
Revenue allocations (gross) by the FAAC (N bn)
Sources: Office of the accountant-general of the federation (OAGF); local media; CBN; FBNQuest Capital Research
- In our chart we have added federally collected PPT and royalty payments. These CBN data lag the FAAC payouts by three months. Some correlation is discernible although the exercise would be more instructive if the threadbare commentary after the committee meetings still divided the gross statutory allocation between mineral and non-mineral revenue. For some reason, this practice ceased in mid-2018.