NEITI: FAAC Disbursement Hits N2.273tn in Q3 2019

•VAT revenue drops by N36.82bn in third quarter

James Emejo and Chineme Okafor in Abuja

The Federation Account Allocation Committee (FAAC) disbursed N2.273 trillion to the three tiers of government and other statutory recipients between July and September this year, according to data from the Nigeria Extractive Industries Transparency Initiative (NEITI).

Also, the total revenues from Value Added Tax (VAT) dropped by N36.8 billion to N275.12 billion in the third quarter of the year compared to N311.94 billion in the preceding quarter, according to the National Bureau of Statistics (NBS).

NEITI in a statement signed by its Director of Communications, Dr. Orji Ogbonnaya Orji, explained that the disbursement was 18.79 per cent higher than the N1.913 trillion shared in the second quarter of 2019 by the parties.

The figure was also 17.81 per cent higher than the N1.929 trillion disbursed in the first quarter of the year.
It was, however, lower than the N2.28 trillion recorded in the third quarter of 2018.

NEITI, in the latest edition of its Quarterly Review said it extracted the data from FAAC and NBS.
It noted that for the first time since the fourth quarter of 2018, total FAAC allocations exceeded N2 trillion in a quarter.
Combining this with disbursements in previous quarters, it said it showed that FAAC disbursements exceeded N2 trillion in four of the last six quarters.

“The last time this happened was in the third quarter of 2014. This is a big improvement compared to N886.48 billion recorded in 2016-Q2. However, it is still lower than N2.607 trillion of 2013-Q1,” said the report.

It added that a breakdown of the N2.273 trillion disbursed in the last quarter of 2019 showed that the federal government received N920.2 billion, while the states and local government received N724.16 billion and N44.19 respectively.

It said the amount received by the federal government in the third quarter of 2019 was 15.6 per cent higher than the N795.84 billion it received in the second quarter. Besides, it was also 14.6 per cent higher than the N803.13 billion it received in the first quarter of the same year.

For states, it explained that the amount received during the third quarter of 2019 was 9.6 per cent higher than the N660.2 billion they received in the second quarter and also 7.3 per cent higher than the N675.2 billion they got in the first quarter of the same year.

The amount received by the local governments for the same period, it added, was 12.02 per cent higher than the N393.95 billion received in the second quarter and 10.73 per cent higher than the N398.44 billion received in the first quarter.

According to the NEITI, the aggregate FAAC disbursements for the first nine months of 2019 were N6.115 trillion.
It explained that the breakdown of the aggregate disbursements showed that between January and September 2019, the federal government received a total of N2.519 trillion, while the states and the local governments received N2.059 trillion and N1.223 trillion respectively.

On disbursements to state governments in the third quarter of 2019, the NEITI noted a wide disparity between Osun State, which received the lowest amount of N6.89 billion and Delta State that got the highest disbursement of N54.88 billion.

“This implied that Delta State received almost eight times what Osun State got,” the NEITI explained.
The NEITI also showed that the four states with the highest net disbursements were all in the South-south geopolitical zone and they received a combined total of N173.65 billion.
“This was more than the combined total of N164.58 billion received by the 14 states with the lowest disbursement,” it added.

On direct deductions from states’ allocations in the third quarter of 2019, it said Yobe State had the lowest deductions of N593.03 million while Lagos recorded the highest deduction of N12.09 billion.

The NEITI Review also disclosed that, “combined FAAC disbursements for the first three quarters of 2019 – taken as a percentage of 2019 budgets – were above 30 per cent in only seven states.”

The report further noted that the majority of the states had received below 30 per cent of their annual budgets in FAAC disbursements after the ninth month of 2019.

“Net FAAC disbursements being below 30 per cent in most states is worrying, because most states depend on FAAC disbursements for at least 80 per cent of their revenues.

“The implication is that most states’ budgets will be underfunded this year. The possible exceptions are Lagos, Rivers and Ogun states, which have considerable history of high internally generated revenue (IGR),” it explained.

VAT Revenue Drops by N36.82bn in Q3

Meanwhile, the total revenues from VAT dropped by N36.8 billion to N275.12 billion in the third quarter of the year compared to N311.94 billion in the preceding quarter, according to the NBS.

The NBS, in its sectoral distribution of VAT data for Q3 added that the figure represented a contraction of 11.81 per cent on a quarter-on-quarter analysis and 0.59 per cent increase (year-on-year).

According to the report, professional services generated the highest amount of VAT of N32.09 billion, closely followed by manufacturing with N30.27 billion.

VAT from commercial and trading totalled N14.47 billion while mining generated the least and closely followed by textile and garment industry and pharmaceutical, soaps and toiletries with N44.30 million, N253.83 million and N291.06 million, respectively.

The statistical agency explained that out of the total amount generated in Q3, N150.74 billion was generated as non-import VAT locally while N63 billion was realised as non-import VAT for foreign.

It stated that the balance of N61.37 billion was generated as NCS-Import VAT.
The Nigerian government is currently faced with huge revenue challenges.
President Muhammadu Buhari had sought to raise VAT rate from five per cent to 7.5 per cent amidst other fiscal adjustments to boost tax receipts.

Earlier in October, he presented the Finance Bill, alongside the 2020 Appropriation Bill to a joint session of the National Assembly for consideration and passage into law.

The bill, which was passed by the Senate last month, comprises seven bills, seeking to amend six tax provisions and make them more responsive to tax reform policies.

Although the move to raise the VAT by the federal government has been opposed by a section of Nigerians, the country’s VAT rate remained one of the lowest in the world.

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