Friday, August 28, 2020 / 10:54 AM / By FBNQuest Research  / Header ImageCredit: Ecographics

Thegross monthly payout by the Federation Account Allocation Committee (FAAC) tothe three tiers of government and eligible agencies amounted to N676bn(US$1.75bn) in August (from July revenue). This was an increase of N25bn on theprevious month. The communique issued at the end of its virtual meeting lastweek noted a healthy increase in the take from oil and gas royalties, petroleumprofit tax (PPT) and VAT. At the same time, receipts from companies' incometax, and import and excise duty declined from the previous month. The totalconsisted of N544bn by way of the gross statutory distribution and N132bn fromthe VAT Pool.

Thepayout has held up better than expected this year when we consider the slowdowndue to the Covid-19 virus and the weakness in the crude price, notably in Marchand April. Mineral receipts (ie from oil) generally provide at least two thirdsof statutory distribution: the lags in oil tax payments may explain theapparent anomaly.

Stategovernments received a total of N234bn including N43bn for the oil producersthat benefit from the 13% derivation formula. Payments at this level are wellshort of their requirements. In 2018 they spent in aggregate an average ofN371bn per month (N271bn on recurrent and N100bn on capital items).

Aminority of states, led by Lagos, generate substantial internal revenuethemselves. For the majority, the prospects are bleak: they are supposed tohonour the latest rise in the minimum wage, unemployment is rising and the FGNhas restricted their access to borrowing. Their formidable challenge in thisenvironment is to improve their collaboration with the private sector, overhaultheir efforts at tax collection and coordinate with their respective localgovernments using technology.

On apositive note, the monthly collection in the VAT Pool has increased from N94bnin April to N132bn in June, for which the rise in the standard rate to 7.50%from February, the end to the lockdown and, we hope, deeper coverage wereresponsible.

We have taken the data for the latest payout from local media reports.The series on the OAGF website does not go beyond June 2019.

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