On Thursday, the Federation Account Allocation Committee (FAAC) allocated N786.161 billion to the three tiers of government for May 2023.
The Federal Government received N301.889 billion from the stated amount, which included Gross Statutory Revenue, Value Added Tax (VAT), Electronic Money Transfer Levy (EMTL), and Exchange Difference, while states received N265.875 billion, Local Government Areas received N195.541 billion, and oil producing states received N22.855 billion as derecognition.
After the meeting, FAAC reported that VAT gross revenue for May was N270.197 billion, up from N217.743 billion in April.
N10.808 billion went to collecting charges and N7.782 billion to transfers and refunds. The Federal Government received N37.741 billion, states N125.804 billion, and LGAs N88.062 billion from the remaining N251.607 billion.
Thus, Gross Statutory Revenue for the month was N701.787 billion, up from N497.463 billion in April 2023. N26.831 billion went to collecting costs and N155.411 billion to transfers and refunds.
Distributing the remaining N519.545 billion: Federal government received N261.686 billion, states N132.731 billion, LGAs N102.330 billion, and oil derivation N22.798 billion.
EMTL’s N14.969 billion was apportioned to the three tiers of government as follows: Federal Government, N2.155 billion; states, N7.185 billion; LGAs, N5.030 billion; cost of collection, N0.599 billion.
PPT, CIT, Oil and Gas Royalties, Import and Excise Duties, and VAT climbed dramatically, whereas EMTL declined little.
The Nigerian National Petroleum Corporation Limited (NNPCL) failed not deposit funds into the federal account despite the Excess Crude Account (ECA) balance of $473,754.57 on June 22, 2023.
President Bola Tinubu formed an inter-agency group to address the NNPCL-FAAC dispute to boost the nation’s revenue.
“Mr President has approved the memo from NNPC to set up a committee to reconcile the crisis between NNPC and FAAC over the failure to remit money into the federation account,” a Presidency source said yesterday.
The national energy firm wrote that the situation be rectified after an anonymous Presidency source indicated vested interests had misled the president.
“Because we want the public to know the truth, NNPC management wrote the President to investigate the matter and Mr President has graciously approved that an inter-agency committee be set up to investigate and reconcile the matter,” the industry source said.
FAAC had repeatedly accused NNPC of short-changing it by refusing to pay over N2 trillion to the federation account from crude sales, royalties, and taxes, while NNPC claimed that the Federal Government owed it over N4 trillion in subsidy payment, power debt, and other charges.
The committee, which is due to meet today at the Ministry of Finance, is charged with reconciling the disputes over the Federal Government’s N4.2 trillion debt to NNPC and NNPC’s N2.1 trillion debt to FAAC.
The debt reconciliation committee includes the Ministry of Finance, NNPC, NUPRC, FIRS, OAGF, and FAAC Post-Mortem Sub-Committee.
The President formed the group after receiving a June 13, 2023 memo from NNPC Group CEO Mele Kyari requesting his intervention.
Meanwhile, the Debt Management Office (DMO) has warned the Federal Government against borrowing more because 73.5 percent of this year’s revenue will go to debt service. The DMO says this high Debt Service-to-Revenue ratio threatens debt sustainability.
For a sustainable Debt Service-to-Revenue ratio, the DMO advised FG to increase revenue. It proposed increasing FGN revenue from N10.49 trillion to N15.5 trillion. 2022 debt analysis led to these recommendations.
DMO found that additional borrowings, FG’s Ways and Means (W&M) at the CBN, and expected Promissory Notes issuance will boost the Total Public Debt-to-GDP ratio to 37.1 percent in 2023.
The baseline scenario shows that the debt stock is manageable, but the borrowing space is lower than the self-imposed debt ceiling of 40%.
Due to insufficient revenue, the 2023 FGN Debt Service-to-Revenue ratio is 73.5 percent, exceeding the recommended 50 percent. This underlines the urgent need to considerably raise government revenue. To reduce public debt, the DMO stressed the need of following government borrowing laws such the Fiscal Responsibility Act 2007 and the CBN Act 2007.
To boost tax revenue to GDP, the DMO recommended revenue mobilization and changes. It also advised using Public-Private Partnerships (PPP) to fund infrastructure projects and privatizing or selling government assets to reduce indebtedness.
Due to the perilous debt service-to-revenue ratio, experts have advised the DMO against borrowing more. They stressed fiscal prudence, borrowing restrictions, and revenue-boosting measures.
The DMO’s warning highlights Nigeria’s debt problems. To ensure debt sustainability and economic stability, sustainable revenue generation and wise fiscal management are crucial.
