…FAAC Revenue Eroded By Inflation, Naira Depreciation – Experts
The federal government, states, and local governments collectively received over N27tn in revenue allocations in 2024, marking the highest-ever disbursement by the Federation Account Allocation Committee (FAAC).
This surge in revenue was driven by savings from the removal of fuel subsidies, rising international crude oil prices, and favorable foreign exchange differentials.
FAAC allocations have steadily increased since the removal of the petrol subsidy in May 2023. However, experts argue that inflation and the depreciation of the naira have significantly reduced the real value of these allocations
A breakdown of the monthly disbursement showed that in January, the sum of N1.67tn was disbursed between the FG and the subnational as states received N396.69bn, LGAs N288.93bn while the FG received N383.87bn.
In February, FAAC allocation rose by 23.9 per cent to N2.07tn. The FG received N407.27bn, states received N379.41bn while the LGAs got N278.04bn as their share of the allocation.
In March, FAAC disbursement rose further by 12.5 per cent to N2.33tn with the FG receiving N352.41bn, states N366.95bn while the LGAs got N267.15bn as their FAAC allocation for the month.
The receipt for April fell by 19.7 per cent to N1.87tn. Consequently, allocation dropped to N345.89bn for the FG, while states and LGAs allocation fell to N398.69bn and N288.69bn in April.
Allocation in May went up by 17.1 per cent to N2.19tn as the FG received N390.41bn while states and LGAS got N493.4bn and N293.82bn for the month.
As oil prices rose, the receipt for FAAC allocation in June 2024 saw a boost to N2.32tn. In June, FG’s allocation from FAAC fell to N365.81bn, lower than the previous month. States and LGAs received lower allocation of N388.42bn and N282.48bn.
FAAC for July was the highest in the 12 months under review as N2.68tn was the total receipt. Monthly allocation to the federal government rose to N459.78bn, the highest in the entire year, while state governments and LGAs received N461.94n and N337.02bn.
August FAAC receipts dropped by 22.7 per cent to N2.07tn, leading to a cut in the monthly allocation of FG, states and LGAs. FG’s shares of the allocation dropped to N374.93bn, states got N422.86bn while LGAs share of the allocation dropped to N306.53bn.
Although economic headwinds were frustrating government earnings, FAAC receipt rose by 10.1 per cent to N2.28tn in September. FG’s share in September was N374.93bn, states and LGAs shared N422.86bn and N306.53bn, respectively.
The growth in receipt extended to October as FAAC posted a 17.1 per cent rise to N2.67tn. Further breakdown of the disbursement showed FG received N424.87bn, states N453.27bn, while LGAs got N329.86bn.
In November, the FAAC receipt was N2.67tn with the FG gaining N433.02bn, while state governments received the highest allocation for the year at N490.7bn.
In the same month. LGAs got their second-highest subvention for the year at N355.62bn.
Figures analysed by THE WHISTLER further revealed that in December 2024, a total of N2.31tn was recorded as FAAC receipt while FG received N451.19bn.
States and LGAs got a share of NN498.5bn and N361.75bn which is the highest received by the subnational governments 2024.
Despite the record revenue, experts caution that the allocations have lost significant value due to Nigeria’s soaring inflation, which hit 34.8% in December 2024, a near 30-year high. The naira’s depreciation also compounded the problem, trading at N1,535 per dollar in the official market and N1,670 in the parallel market.
Prof. Peter Njiforte, a development economist at Ahmadu Bello University, Zaria, explained, “Although the allocations appear huge in nominal terms, their real value has been severely eroded by inflation and exchange rate pressures. What N1,000 could buy in 2023 now requires N3,000 or more.”
Njiforte added that the rising FAAC disbursements should translate into improved infrastructure and social welfare.
He also criticized state governments that have failed to implement the new national minimum wage of N70,000, arguing that the increased allocations provided sufficient resources to meet this obligation.
He stated, “The rise in FAAC disbursements should assist governments in meeting the new minimum wage and addressing infrastructure needs. However, the higher cost of executing projects due to inflation may pose a challenge.”
Also, the Registrar of the Chartered Institute of Finance and Control, Godwin Eohoi said while the N27tn allocation in 2024 represents a significant milestone, its impact on the economy and the livelihood of Nigerians remains a contentious issue amidst rising costs and economic uncertainties.
Cash Windfall: FG, States, LGs Shared Record N27tn In 2024 is first published on The Whistler Newspaper
Source: The Whistler
