The total monthly payout by the Federation Account Allocation Committee (FAAC) for distribution to the three tiers of government amounted to N813bn (US$2.65bn) in December (from November revenues). This was an increase of N25bn from the previous month and the highest payout since June. The commentary from the OAGF noted that the take from companies’ income tax was higher than the previous month whereas revenues from VAT, import duty, petroleum profits tax, and oil and gas royalties were all down. The gross statutory allocation was N32bn lower than the distribution in November.
- We have an increase in the total payout due to fx equalisation (N70bn) and VAT payments (N92bn).
- This latest payout distributed N184bn for the states from all sources other than the 13% derivation formula for oil-producing states.
- To provide some context, CBN data for 2017 show that the state governments spent N221bn and N87bn per month pro rata in aggregate on recurrent and capital items. It becomes obvious why many states cannot meet their salary and pension obligations in full. We can also see why the president has set up a “high powered technical committee” to assess the capacity of states to meet a new national minimum wage of N30,000 per month.
Revenue allocations (gross) by the FAAC (N bn)
Sources: Office of the accountant-general of the federation (OAGF); local media; FBNQuest Capital Research
- In almost a footnote to the OAGF commentary, we read that the balance in the excess crude account (ECA) stood at US$630m. Without an explanation for the implied reduction of US$1.5bn from the previous figure, we can only speculate. The ECA is a flawed savings mechanism, as we have often said, and would have been replaced by a fully functioning and legally empowered sovereign wealth fund were it not for the objections of the state governors.
