States Get Surprise Increase In July Allocation

The gross monthly distribution by the Federation Account Allocation Committee increased by 21 percent to N733 billion (USD1.78bn) in July, according to a report by FBNQuest.

The three tiers of government and public agencies got an extra N127 billion payout in July compared to about N606 billion recorded in June.

Oil prices have been doing well in the markets recently, and this may be partly responsible for the increase. This is because the country's take from petroleum profit tax (PPT), companies’ income tax, import and excise duty, and oil and gas royalties recorded substantial increases over the previous month.

The report showed that state governments received a total of N143bn, including N51bn representing the 13 percent derivation for the few oil-producing states.

The headline figure was made up of N586bn in gross statutory distribution, N143bn from the VAT Pool, and foreign exchange adjustments totaling N4bn.

The balance in the Excess Crude Account (ECA) was set at USD61m. Of the total distribution, N87bn was consumed by a combination of costs, transfers, and unspecified refunds.

The average monthly allocation amounted to N647bn in H1 ’21, compared with N710bn in 2018, N685bn in 2019, and N636bn last year.

The allocation to the states is however insufficient to cater to their aggregate needs. In 2018, they spent an average of N371bn per month (N271bn on recurrent and N100bn on capital items) and N396bn in 2019.

Only a few states, led by Lagos, generate substantial internal revenue and can still meet their spending commitments, including capital items, at these levels of FAAC pay-out.

For a better scope, louts (agberos) in Lagos alone generate more revenue than any state outside Lagos.

For most states that depend solely on the inadequate monthly FAAC distribution, the prospects are bleak: at a National Executive Council (NEC) meeting last week, the minister of finance, budget, and national planning disclosed that deductions of the budget support the facility from state governments will now commence from July.

The federal government had extended the facility to states in 2017 to cushion the impact of dwindling resources and help meet their various obligations.

However, most of these states today are carrying huge debts on their backs with little to no ability to adequately service them.