Hardship: FAAC August allocation to government tiers drops 11.4%

…As all tiers share N1.203 trillion   

…Oil revenue slump, FX fluctuation responsible

By Matthew Denis, Abuja

The Federation Account Allocation Committee (FAAC) has reported a decrease in the distribution of funds to the three tiers of government for August 2024. This decline is notable when compared to the distributions in the preceding months of May, June, and July 2024.

The FAAC’s distribution is a critical mechanism for allocating federal revenues to state and local governments, which are vital for financing public services and development projects. The reduction in these funds comes at a particularly difficult time for Nigerians, who are already grappling with severe economic hardship.

At the conclusion of the Federation Account Allocation Committee (FAAC) meeting on September 17, 2024, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, revealed that a total of N1.203 trillion was allocated to the three tiers of government for August 2024. This allocation comes from a gross total of N2.278 trillion.

Investigation by NewsDirect Business Desk indicates that the government shared the sum of N1,358.075 Trillion to the three tiers of government as Federation Allocation for the month of July, 2024 from a gross total of N2,613.791Trillion which is higher than the figure in August.

While in June, federal, state and the local councils of the Federation received from FAAC a whopping total of N1,354.371 Trillion to the three tiers of government as Federation Allocation for the month of June, 2024 from a gross total of N2,483.890 Trillion soaring than the month of August but slightly lower than the July allocation.

Also, the month of May, 2024 the data from FAAC showed that the three federating units got a total sum of N1,143.210 Trillion to the three tiers of government as Federation Allocation for the month of May, 2024 from a gross total of N2,324.792 Trillion. Here, the funds shared is lower than August however the gross total remains higher than the month of August.

The factors responsible for lower sharing of FAAC to FG, states, and LGs in Nigeria are complex and multifaceted such as Decline in Oil Revenue where Nigeria’s economy is heavily reliant on oil exports, and fluctuations in global oil prices significantly impact revenue generation. When oil prices drop, the revenue shared among the three tiers of government decreases.

Another area is inefficient Tax Collection. Nigeria’s tax-to-GDP ratio is relatively low, which means the country isn’t generating enough revenue from taxesThis reduces the amount available for sharing among the federal, state, and local governments.

 Corruption and leakages in the system also contribute to reduced revenue sharing. If revenue is not properly accounted for or is syphoned off, there’s less to share. Inadequate Diversification, Exchange Rate Fluctuations occasioned by a weaker naira can reduce the value of revenue generated from foreign exchange.

In order to address these challenges, Nigeria needs to diversify the economy by developing other sectors, such as agriculture, manufacturing, and services, to reduce dependence on oil exports.

The government should enhance tax administration and broaden the tax base to increase revenue generation. Ensure transparency and accountability in revenue collection and allocation to minimise corruption and leakages. Also develop skills and capacities to drive economic growth and revenue generation.

By tackling these underlying issues, Nigeria can increase revenue generation and ensure more equitable sharing among the federal, state, and local governments.

Earlier, while speaking on FAAC distribution for August, the Minister stressed that from the stated amount inclusive of Gross Statutory Revenue, Value Added Tax (VAT), Electronic Money Transfer Levy (EMTL) and Exchange Difference (ED), the Federal Government received N374.925 Billion, the States received N422.861 Billion, the Local Government Councils got N306.533 Billion, while the Oil Producing States received N99.474 Billion as Derivation, (13% of Mineral Revenue).

He explained that the sum of N81.975 Billion was given for the cost of collection, while N992.617 Billion was allocated for Transfers Intervention and Refunds.

The Communique issued by the Federation Account Allocation Committee (FAAC) at the end of the meeting indicated that the Gross Revenue available from the Value Added Tax (VAT) for the month of August 2024, was N573.341 Billion as against N625.329 Billion distributed in the preceding month, resulting in a decrease of N51.988 Billion.

From that amount, the sum of N22.934 Billion was allocated for the cost of collection and the sum of N16.512 Billion given for Transfers, Intervention and Refunds. The remaining sum of N533.895 Billion was distributed to the three tiers of government, of which the Federal Government got N80.084 Billion, the States received N266.948 Billion and Local Government Councils got N186.863 Billion.

Accordingly, the Gross Statutory Revenue of N1.221Trillion received for the month was lower than the sum of N1.387 received in the previous month by N165.994. From the stated amount, the sum of N58.415 Billion was allocated for the cost of collection and a total sum of N976.105 Billion for Transfers, Intervention and Refunds.

The remaining balance of N186.636 Billion was distributed as follows to the three tiers of government: Federal Government got the sum of N71.624 Billion, States received N36.329 Billion, the sum of N28.008 Billion was allocated to LGCs and N50.675 Billion was given to Derivation Revenue (13% Mineral producing States).

Also, the sum of N15.643 Billion from Electronic Money Transfer Levy (EMTL) was distributed to the three (3) tiers of government as follows: the Federal Government received N2.252 Billion, States got N7.509 Billion, Local Government Councils received N5.256 Billion, while N0.626 Billion was allocated for Cost of Collection.

The Communique also disclosed the sum of N468.245 Billion from Exchange Difference, which was shared as follows: Federal Government received N220.964 Billion, States got N112.076 Billion, the sum of N86.406 Billion was allocated to Local Government Councils, N48.799 Billion was given for Derivation (13% of Mineral Revenue).

It further disclosed that Companies Income Tax (CIT), Value Added Tax (VAT), Import and Excise Duties, Electronic Money Transfer Levy (EMTL), Petroleum Profit Tax (PPT), Oil and Gas Royalty and Customs External Tariff levies (CET) all recorded decreases.

According to the Communique, the total revenue distributable for the current month of August 2024, was drawn from Statutory Revenue of N186.636 Billion, Value Added Tax (VAT) of N533.636 Billion,  N15.017 Billion from Electronic Money Transfer Levy (EMTL) and N468.245 Billion from Exchange Difference, bringing the total distributable amount for the month to N1.203 Trillion.

The balance in the Excess Crude Account (ECA) as at September 2024 stands at $473.754.57

The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, while welcoming FAAC members, appreciated them for their continued support and contributions, urging  them to do more

While also thanking the Revenue Generating Agencies for their hard work in ensuring that the three tiers of government are running smoothly, HM Edun assured that Nigeria is going well, explaining that *we have a President whose actions is in line with the Rule of Law and he is making sure that whatever the country is going through is a stringent economic conditions aimed at repositioning the economy for the benefit and future of our country*

Edun emphasised that the policies are for the good of the nation, stating, “it is for our own good, we have to go through turbulent situations before the economy will stabilise for good.”

He added that “the challenges we are witnessing are not only limited to Nigeria alone but to other countries of the world. We have to play our own role, fasten our belts.”

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