Naira devaluation pain is great gain of N400bn for FG, States, LGs

The federal, state and local governments in Nigeria are reaping a massive cash bonanza from the devaluation of the Naira that is inflicting considerable pain on Nigerians, a BusinessDay analysis has shown.

The December 2023 gross monthly distribution by the Federation Account Allocation Committee (FAAC) to the three tiers of government amounted to NGN1.1trn or $1.2bn, a massive gain from the level for November 2023.

This significant month on month rise in revenue accruing to FAAC was underpinned by an increase of 80% in exchange rate gain to N365bn the data show.

According to a report by analysts at FBN Quest the growth in the government’s fiscal purse was also supported by increases of 23% m/m and 4% m/m in statutory revenue and value-added-tax to NGN376bn and NGN336bn respectively.

The report said, “gross disbursements in November represents an increase of NGN182bn or +20% m/m over the previous month’s payout. December’s allocation also matches the year’s highest distribution recorded in August of 23, when NGN1.1trn was disbursed to the three levels of government. Additionally, the payout represents the largest m/m increase for as far back as we can track.”

However, electronic money transfer fees received into FAAC decreased by N4bn to N12bn.

The share of revenue to oil-producing states, also known as the 13% derivation fund, increased by N24bn to about N75bn for December alone.

A breakdown shows that the revenue allocation to the federal government increased markedly by 25% to N403bn while disbursements to the 36 states of the federation (excluding the13% derivation for oil-producing states), and local governments increased by 14% m/m and 15% m/m to N352bn and N259bn, respectively.

Despite the surge in the various revenues, the World Bank has pointed out that it had anticipated a larger distributable revenue into the Federation account because of the FG’s decision to eliminate gasoline subsidy and adopt a market reflective exchange rate in Jun ’23.

The World bank mentioned that the expansion in revenue available to the government were mainly gains from the depreciation of the naira currency. That said, the bank suggests that the gap may be explained by lower collections from subsidy removal but the government and NNPC insist that no more subsidy was being paid by government. FG may have re-introduced the payment of fuel subsidy.