Federal Allocation to States and LGAs increased by 15.4% in July
In July ’23, the Federation Account Allocation Committee (FAAC) distributed N907.05 billion to the three levels of government and public entities (from June revenue). This is a 15.4% increase, or N120.9bn, over the previous dividend, and can be ascribed in part to increases in corporate income tax (CIT), import and excise charges, value-added tax (VAT), and oil and gas royalties. The recent increase in the exchange rate disparity also provided a considerable boost. However, the petroleum profit tax (PPT) and electronic money transfer levy (EMTL) have both decreased dramatically. According to channel checks, the distributable revenue for June ’23 was anticipated to be N1.9trn.
However, about N1 trillion was conserved to offset the impact of increased money supply in an already high-inflationary environment. The Federal Government received N348.6 billion, state governments received N295.9 billion, and local government councils received N218.06 billion. Meanwhile, oil-producing states earned N47.5 billion, a 13% increase in mineral earnings.
In addition, the distributable statutory revenue was N301.5 billion. This represents a -41% decrease from the previous month’s total of N519.5bn. We notice that the VAT pool received N273.2 billion, with N11.4 billion coming from the Electronic Money Transfer Levy (EMTL). In July, the total deduction for collection costs was N72.3 billion.
Revenue increased due to the exchange rate differential, which increased from N639m in June to N320bn in July ’23, representing a strong m/m increase of about 50,000%. This increase is partly due to the CBN’s currency deregulation, which took effect in June ’23.
The balance in the Excess Crude Account (ECA) remained steady at USD473,754, indicating a 98% decrease from the USD35.4m recorded in June ’22. State governments should continue to prioritize competitive advantage areas such as agriculture and solid minerals, among others, in order to achieve self-sufficiency, as reliance on FAAC allocation is untenable in the long run. Furthermore, increasing internal revenue will enable states to undertake essential capital projects and social welfare initiatives for indigenous peoples. SOURCE: Coronation Merchant Bank
