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By Chinwendu Obienyi
Despite improved tax collections, currency appreciation and declining crude prices may likely limit future inflows from Federation Accounts Allocation Committee (FAAC) disbursements, economic experts stated this on Monday.
This is coming after disbursements from the Federation Accounts Allocation Committee (FAAC) to the three tiers of government fell by 5.5 percent month-on-month (m/m) to N2.10 trillion in October, compared to N2.23 trillion shared in September, following lower receipts from key non-oil and oil revenue sources.
The decline, according to the FAAC communiqué issued after the committee’s October meeting, was driven by weaker inflows from Company Income Tax (CIT), Customs External Tariff (CET) levies, Oil and Gas royalties, and Excise Duty. However, collections from Petroleum Profit Tax (PPT), Electronic Money Transfer Levy (EMTL), Value Added Tax (VAT), and Import Duty recorded modest increases during the month.
The total allocation represented 68.9 per cent of gross revenue of N3.05 trillion, with the remaining N835.00 billion directed to transfers, interventions, and refunds, and N116.15 billion set aside for collection costs.
From the amount shared, the Federal Government received N711.31 billion, down from N810.05 billion in September, while state governments got N727.17 billion (September: N709.83 billion), and local governments received N529.95 billion (September: N522.23 billion). In addition, oil-producing states earned N134.96 billion as 13 per cent derivation from mineral revenue, higher than N120.76 billion recorded in September.
Experts say the moderation in FAAC disbursements underscores the volatility in Nigeria’s oil-dependent revenue base and the fiscal pressure facing all tiers of government. They, however, expect some near-term recovery in allocations as oil production and corporate tax collections improve.
“Higher domestic oil output and stronger Company Income Tax performance could boost FAAC inflows in the coming months. But the recent appreciation of the naira and softer global oil prices could limit foreign exchange-related gains from oil receipts, reducing the naira value of dollar earnings”, analysts at Cordros Research said.
The three tiers of government pared by 5.5% m/m to NGN2.10 trillion in October (September: NGN2.23 trillion), reflecting lower receipts from Company Income Tax (CIT), Customs External Tariff (CET) Levies, Oil & Gas Royalty and Excise duty, while revenue from Petroleum Profit Tax (PPT) Electronic Money Transfer Levy (EMTL), Value Added Tax (VAT) and Import Duty improved. The allocation represents 68.9% of October’s gross revenue (NGN3.05 trillion), with the balance directed to transfers, interventions, refunds (NGN835.00 billion) and collection costs (NGN116.15 billion). By distribution, the FGN received NGN711.31 billion (September: NGN810.05 billion), States, NGN727.17 billion (September: NGN709.83 billion) and Local Governments NGN529.95 billion (September: NGN522.23 billion), while oil-producing states got an additional NGN134.96 billion (September: NGN120.76 billion) as derivation (13.0% of mineral revenue). In the near term, we expect potential revenue gains to stem from higher domestic oil production and relatively stronger CIT collections, driven by improved macroeconomic conditions. However, the recent naira appreciation and weaker oil prices may limit FX-related gains from oil receipts, tempering overall growth in FAAC inflows.
