The Federation Account Allocation Committee’s (FAAC’s) plan to share N5.7 trillion to the three tiers of government within the year is under threat, FBN Quest has reported.
A report by FBN Quest, the investment and research arm of FBN Holdings, said the cash was expected from the net distribution of the Federation Account and the Value Added Tax (VAT).
The report titled: “Another poor payout by the FAAC” said the payout to the three tiers of government amounted to N420 billion ($1.38 billion) this month (from last month’s revenues). The figure remains below the forecast pro- rata monthly average of N477 billion for this year budget, which projects the net distribution from the Federation Account and the VAT pool combined at N5.72 trillion.
It said crude oil price crash has in recent months hit the FAAC cash, leading to the drop in the allocation and the inability of many states to honour recurrent obligations, including salaries and pension liabilities, as well as capital obligations, adding that both mineral and non-mineral revenues were below par last month, resulting in the lowest distribution for five months.
Last month, the Federal Government warned that revenues would again be low because of the three-month lag in the accounting treatment of mineral revenues. The argument was that sabotage of oil industry installations was acute in June and July.
The national accounts for the third quarter of the year, however, indicated that crude output may not have recovered in the balance of the third quarter after the FAAC meeting which suggested that the volume of import duty and the collection of companies’ income tax also ended in disappointment in October.
The research firm said the statutory distribution of N239 billion was supplemented by excess petroleum tax payments of N109 billion, an exchange-rate gain of N37 billion, the regular Nigeria National Petroleum Corporation (NNPC) “refund” of N6 billion and VAT.
It said the three previous distributions were boosted by the impact of the Central Bank of Nigeria (CBN) ‘devaluation’ on June 20, adding that both petroleum receipts based on the US dollar price and Customs revenues benefited from the adjustment.
The CBN had abandoned a 16-month currency peg on June 20 and adopted flexible foreign exchange policy, which gave the naira greater flexibility to adjust against the dollar. The ‘devaluation’ of the naira was meant to provide the much-desired stimulus and foreign portfolio investment needed to boost investments in the capital market.
The drop in FACC revenues was also caused by the state of force majeure declared at the Bonny terminal and the subsisting force majeure at the Forcados terminal as well as the drop in non-mineral revenue in September.
Analysts insist the oil price crisis resulted from drastic, adverse structural shift in the global market demand and supply of oil and gas. International market price of oil dropped by about 43 per cent from an average of about $100.35 for the 12 months of 2014 to an average of $57.20 for the first six months of last year and closed at $47.44 per barrel on Monday ahead of OPEC meeting in Vienna, today.
Source : ThenationonlineThenationonline