May 3, 2019

Another poor FAAC payout

The gross monthly payout by the Federation Account Allocation Committee (FAAC) to the three tiers of government totaled N618bn (US$2.01bn) in April (from March revenue). This was N2bn lower than the previous month. A strong rise in oil royalties and import/excise levies was matched by a steep decline in the take from the petroleum profit tax (PPT). The overall trend highlights the risible level of tax collection, which is running at less than half Kenya’s (16.0% of GDP in 2017/18). The commentary after the meeting noted that the balance in the excess crude account was unchanged, at US$183m.

                                                                                                                  

  • The gross statutory allocation of N447bn within the payout was N31bn lower than in March. However, the total payout was just N2bn lower due largely to an inflow of N55bn quaintly termed in the local media as a “good and valuable contribution”. (All payments into the federation account would surely be thus characterized.) Additionally, there was an unexplained payment of N10bn by the NNPC into the federation account.
  • We have often said that a dramatic boost to the paltry tax collection would give the opportunity to overcome Nigeria’s many developmental challenges.
  • Distributions over the past year have disappointed with very few exceptions. The beleaguered state governments received N218bn in aggregate this time (including the 13% derivation for the lucky few designated as oil producers), 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 also show federally collected PPT and royalty payments. The CBN data lag the FAAC payouts by three months. Some correlation is visible although the exercise would be more useful if the thin official commentary after the committee meetings still divided the gross statutory allocation between mineral and non-mineral revenue.