Tony Chukwunyem 
In order to ensure more resilience against future shocks, state governments in the country should depend less on the funds they receive monthly from the Federation Account Allocation Committee (FAAC) and diversify their revenue base, analysts at the Research Department of Coronation Merchant Bank have said.
The analysts stated this while reacting to the latest communiqué issued by the FAAC committee on the gross monthly distribution to the three tiers of government and public agencies, which shows that of the N990billion distributed in January, the Federal Government received a total of N375.3bn, state governments received N299.6bn and oil-producing states received an additional N93.5bn representing the 13% derivation for mineral revenue. The analysts, who pointed out that the numbers for December showed an increase of 9.8 per cent or N88.1 billion from the previous payout (N902bn recorded in November ’22) and “marks the highest FAAC payout recorded in 2022,” said the increase can be partly attributed to improved non-oil revenue collection.
Specifically, they emphasised that the December data showed that Companies’ Income Tax (CIT), Value Added Tax (VAT), oil and gas royalties and export duties recorded increases while import duties declined significantly. Furthermore, they stated that the FAAC committee disclosed that the Excess Crude Account (ECA) remained unchanged from the previous month at $473.7 million. According to the analysts, “despite elevated oil prices, which were above the FGN’s 2022 oil price benchmark ($73/barrel), the ECA has remained relatively low. In 2014, the ECA was as high as $4.1 billion.” Noting that the Nigerian National Petroleum Company (NNPC), “made zero contributions to FAAC in 2022, largely due to high fuel subsidy costs,” the analysts said: “To avoid overreliance on FAAC distributions and ensure more resilience against future shocks, state governments need to diversify their revenue base.” They further stated: “Unemployment and underemployment continue to cost states billions of naira in forgone revenue through payment of income taxes (PAYE),” adding that “to boost IGR, states should consider providing incentives for the private sector to support economic activities within their respective states.”
