The Federation Account Allocation Committee (FAAC) has announced the distribution of a whopping N907.054 billion as the revenue generated from various sources in June 2023.
This is the highest amount ever shared by the FAAC since its inception in 1992. The June revenue represents a significant increase from the N714.629 billion shared in May 2023.
The FAAC is a statutory body that meets monthly to allocate revenue from the Federation Account to the three tiers of government: the Federal Government, the State Governments and the Local Government Councils. The Federation Account is made up of revenues from oil and gas sales, taxes, customs duties, royalties, fines and other sources.
According to a communiqué issued at the end of the FAAC meeting for July 2023, chaired by the Accountant General of the Federation, Dr. Oluwatoyin Madein12, the N907.054 billion total distributable revenue comprised:
- Distributable statutory revenue of N301.501 billion
- Distributable Value Added Tax (VAT) revenue of N273.225 billion
- Electronic Money Transfer Levy (EMTL) revenue of N11.436 billion
- Exchange Difference revenue of N320.892 billion
The communiqué also stated that the balance in the Excess Crude Account (ECA), which is a special account where excess oil revenues are saved for future use, stood at $473,754.57 as of June 202312.
The breakdown of how the N907.054 billion was shared among the three tiers of government is as follows:
- The Federal Government received N345.564 billion
- The State Governments received N295.948 billion
- The Local Government Councils received N218.064 billion
- A total sum of N47.478 billion was shared to the relevant States as 13% derivation revenue, which is a special allocation for oil-producing states based on their contribution to the Federation Account.
The communiqué further explained that the gross statutory revenue of N1,152.921 billion received for June 2023 was higher than the sum of N701.787 billion received in May 2023 by N451.134 billion. This was mainly due to the removal of fuel subsidy by the Federal Government in June 2023, which led to an increase in oil revenues.
From the distributable statutory revenue of N301.501 billion:
- The Federal Government received N146.710 billion
- The State Governments received N74.413 billion
- The Local Government Councils received N57.370 billion
- The sum of N23.008 billion was shared to the relevant States as 13% derivation revenue.
For June 2023, the gross revenue available from VAT was N293.411 billion, which was higher than the N270.197 billion available in May 2023 by N23.214 billion. This was attributed to improved economic activities and increased compliance by taxpayers.
From the distributable VAT revenue of N273.225 billion:
- The Federal Government received N40.984 billion
- The State Governments received N136.613 billion
- The Local Government Councils received N95.629 billion.
The EMTL revenue of N11.436 billion was generated from a new levy imposed on electronic money transfers above N10,000 by banks and other financial institutions12. This levy was introduced by the Finance Act 2020 to boost non-oil revenues and support digital financial inclusion.
From the EMTL revenue of N11.436 billion:
- The Federal Government received N1.715 billion
- The State Governments received N5.718 billion
- The Local Government Councils received N4.003 billion.
The Exchange Difference revenue of N320.892 billion was derived from the difference between the official exchange rate and the parallel market rate used to convert foreign currency revenues into naira. This revenue helps to cushion the impact of exchange rate fluctuations on the Federation Account.
From the Exchange Difference revenue of N320.892 billion:
- The Federal Government received N156.155 billion
- The State Governments received N79.204 billion
- The Local Government Councils received N61.063 billion
- The sum of N24.470 billion was shared to the relevant States as 13% derivation revenue.
The FAAC also announced the establishment of an Infrastructure Support Fund (ISF) for the 36 states of the federation, which will be funded from a portion of the excess revenue generated from the subsidy removal. The ISF is meant to provide financial assistance to the states for the development of critical infrastructure projects.
The FAAC commended the Federal Government for its bold decision to remove the fuel subsidy, which has been a source of wastage and corruption for decades.
The FAAC also urged the states and local governments to use their allocations prudently and transparently, especially in the face of the COVID-19 pandemic and its socio-economic impacts.