FAAC shares N2.43trn as oil revenue rebounds, deductions erod

The Federal Government, 36 states and 774 local government councils shared N2.428 trillion in October from Federation Account revenue generated in September, but rising deductions absorbed more than half of the increase in gross revenue, limiting the additional funds available for public spending.

The allocation rose by N90 billion, or 3.85 per cent, from the N2.338 trillion shared in September, following a recovery in statutory revenue, particularly petroleum-related taxes and royalties. However, the latest distribution remained N579 billion below the N3.007 trillion shared in August.

Figures released after the October meeting of the Federation Account Allocation Committee (FAAC) in Abuja showed that gross Federation Account revenue increased by N228 billion, or 6.2 per cent, to N3.913 trillion in September from N3.685 trillion in August.

Yet the amount available for distribution increased by only N90 billion because deductions for collection costs, transfers, refunds and savings also rose.

Cost of collection climbed by N6.62 billion to N131.76 billion, while transfers, refunds and savings increased by N131 billion to N1.352 trillion, reducing the benefit of stronger revenue generation.

The development highlights a persistent fiscal challenge for Nigeria: higher gross collections do not necessarily translate into a proportionate increase in the funds available to finance infrastructure, education, healthcare and other public services.

Gross statutory revenue recovered by N246.38 billion to N3.096 trillion from N2.850 trillion in August, an increase of about 8.6 per cent. The recovery followed a sharp contraction in July and August.

Value Added Tax (VAT), however, weakened. Gross VAT collections fell by N17.97 billion, or 2.2 per cent, to N816.87 billion from N834.84 billion in August, reversing the previous month’s improvement.

FAAC said Petroleum Profit Tax, Hydrocarbon Tax, petroleum royalties, import duties, Common External Tariff levies and excise duties recorded increases. These gains were partly offset by declines in Companies Income Tax, Capital Gains Tax, stamp duties, VAT, mineral royalties, gas-flaring penalties and miscellaneous oil revenue.

The mixed performance underscores the continued importance of petroleum-related receipts to government finances, while the VAT decline raises questions about the consistency of collections from consumption and business transactions.

Of the N2.428 trillion distributed, the Federal Government received N832.24 billion, while states received N799.87 billion and local government councils got N560.66 billion. Benefiting oil-producing states also received N236.05 billion in derivation revenue, representing 13 per cent of mineral revenue.

The Federal Government’s allocation increased by N27.35 billion from September, while state governments received an additional N5.56 billion and local governments N5.52 billion. Derivation payments rose by N51.66 billion, or 28 per cent, to N184.39 billion.

The distributable pool comprised N1.672 trillion in statutory revenue and N756.59 billion in VAT. The Federal Government received N756.58 billion from statutory revenue and N75.66 billion from VAT. States received N383.75 billion and N416.12 billion respectively, while local governments received N295.86 billion in statutory revenue and N264.81 billion from VAT.

For state and local governments, which rely heavily on monthly FAAC transfers to meet recurrent obligations and finance capital projects, the additional allocation offers some fiscal relief. But the modest increase relative to gross revenue growth illustrates the difficulty of planning expenditure when collections and deductions fluctuate sharply from month to month.

The latest figures reinforce the need for more predictable revenue generation, stronger non-oil collections and greater scrutiny of deductions to ensure that increases in government revenue translate into improved public services and productive investment.