FAAC: Internally Generated Revenue still low, unable to meet needs of states
By Chibisi Ohakah
Statutory monthly payout by the Federation Account Allocation Committee (FAAC) to the three tiers of government, namely federal, state, and local government, amounted to N716 billion in January (from December revenue). The figure recorded an increase of N80 billion from the previous month.
But a Central Bank of Nigeria (CBN) report said the payouts are increasingly unable to meet the needs of many state governments, even as internally generated revenue at all levels have remained low.
According to the report, what many of the states receive from FAAC does not cover their average aggregate recurrent spending of N269 billion per month, let alone the average (and grossly inadequate) outlay on capital items of about N101 billion.
Details of the report showed that receipts from Companies’ Income Tax (CIT), Petroleum Profit Tax, VAT, and oil and gas royalties were well up on the previous month whereas import duty was slightly higher. The balance in the excess crude account was unchanged at US$325 million.
A close scrutiny showed that the gross statutory payouts included the allocation of N601 billion, the VAT Pool of N115 billion and a modest exchange-rate gain. Also the fees and charges of the collection agencies consumed N43 billion of the total declared.
Other details in the FAAC report showed internally generated revenue collection is lagging in the budget. Central Bank of Nigeria (CBN) data indicating monthly data for gross revenue collected in the federation account in the 13 months to November showed that N799 billion budget for oil receipts was not once achieved, and that the best performance was N602 billion in November 2018.
“The N447 billion target for non-oil revenue was achieved just once, in July with N574 billion collected in the month of peak CIT receipts,” the report said. On the other hand, states in Nigeria received N242 billion from the latest distribution including the payout to the beneficiaries of the 13% derivation formula.
“This would not have covered their average aggregate recurrent spending of N269 billion per month in 2018, let alone the average (and grossly inadequate) outlay on capital items of N101 billion. A minority of states collect sufficient internally generated revenue to top up the FAAC payout and meet their obligations,” said the Office of the Accountant General of the Federation.