Monthly Federation Account inflow jumps by 148.4% following petrol subsidy termination
Federal, state and local governments are set for a windfall from subsidy removal. They will receive the highest allocations today from the Federation Account Allocation Committee (FAAC).
After sharing a total of N3.62 trillion from January to May 2023, FAAC is about to share an all-time high of N1.959 trillion.
It is the revenue generated last month alone, the full month after the May 29 removal of petrol subsidy.
Exactly N750.174 billion was shared with the three tiers of government in January. In February, N722.677 billion was shared.
A total sum of N714.629 billion was disbursed in March.
There was over a billion naira drop in shared revenue accruals for April but a marginal jump occurred in May with N786.161 billion shared.
Since the beginning of the year, petroleum profit tax (PPT), companies income tax (CIT), oil and gas royalties and electronic money transfer levy (EMTL) have performed abysmally in contributing to the federation account.
Going by FAAC records, PPT, CIT ROYALTY and EMTL recorded declines in their contribution to the federation account.
For four out of five months, VAT maintained declining contributions, except for May. Import and Excise duties recorded 60 per cent monthly incremental contributions.
However, since President Bola Ahmed Tinubu put a stop to the payment of subsidy on May 29, the federation account has recorded approximately a 148.43 per cent increase in revenue from N786.161 billion in May to N1.959 trillion in June.
The technical and plenary meetings of the FAAC will be held today to formally approve the amount that will go to the Federal Government, state and local governments. (The nation)
Statutory collections make up N1.7 trillion of the federally collected revenues, followed by N293 billion from Value Added Tax (VAT) and N12 billion from electronic money transfer charges.
The Nation learnt that a substantial part of the N1.959 trillion will come from the contributions made by the Federal Inland Revenue Service (FIRS), the Nigeria Customs Service (NCS), and foreign exchange gains as the receipts from the sale of crude oil.
Officials at the Federal Ministry Of Finance and the Office of the Accountant General of the Federation (OAGF) did not deny the amount but said the figure could be “speculative”.
A financial expert, Prof. Uche Uwaleke of Nasarawa State University, described the amount to be shared as a “remarkable increase in FAAC allocation”.
He noted that for proper accountability and transparency of the funds’ utilisation, it is necessary to “ascertain from the FAAC Allocation the proportion of the increase in funds resulting from the naira devaluation”.
He suggested a “ring-fence” of the funds “by creating special accounts for them and obtain approval from the National/State Assemblies as the case may be to apply them to special projects in education, health and infrastructure provision”.
Such a fund should not be used to implement an increase in minimum wage or applied to recurrent expenditure.
Such funds, he added, “should not be used to implement an increase in minimum wage or applied to recurrent expenditure. All tiers of government should endeavour to increase workers’ salaries through reducing waste and cost of governance as well as plugging loopholes in revenue collection leveraging technology.”
Managing Director/CEO of SD&D Capital Management Limited, Mr Gbolade Idakolo, told The Nation that the amount to be shared shows that increased revenue has started accruing to the federation account due to subsidy removal and tax revenues.
He added: “This revenue should be adequately utilised by the three tiers of government to substantially address infrastructural deficits and palliative to the people down to the grassroots.
“The pain of the subsidy removal and exchange rates policy of the Federal Government is still very fresh and the government should take urgent proactive measures to intervene and reduce the hardship.”
An official in the Presidency said: “That FAAC will share almost N2trillion for June, the first time in history, as revenue for the three tiers of government, is an immediate and major benefit of fuel subsidy removal.
“This money that would have been frittered away, in a month, via fuel subsidy will now go into the coffers of government to improve living conditions of the people. What this means is that there will now be more money available for real development.
“States and local governments will have enough money to pay salaries of workers and pensioners.
“Government at all levels will become more solvent, be in a stronger financial position to easily pay new minimum wage and fund development in critical sectors, especially in education, healthcare and public transportation.”
The official said Nigerians should “begin to focus attention on our states and local governments to demand more accountability and transparency in the use of public funds”.
“The real governance impact should be at the state and local levels.”
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