State Governors Endorse FG’s Proposal To Share Only N900billion From N1.9trillion FAAC Revenue
… Over N1trn To Be Used To Shore Up CBN Reserves
Friday July 21, 2023
The 36 State Governors have endorsed the proposal of the Federal Government not to share the entire revenue of N1.9trn which may have accrued to the federation by Federation Accounts Allocation Committee.
The endorsement of the Federal Government’s proposal was made at a meeting held by the Governors on Wednesday night in Abuja.
It was gathered that during the meeting, the issue of the revenue accruals into the federation account was discussed ahead of the FAAC meeting to be held later today.
During the meeting, the Federal Government had proposed that the sharing of the entire N1.9trn was not a good idea because it would increase the amount of money in circulation and cause further inflationary pressures in the economy.
Nigeria’s inflation stands at about 22.7 per cent based on figures released by the National Bureau of Statistics.
One of the governors who attended the meeting said in view of the removal of fuel subsidy, the Federal Government raised concerns that if the entire N1.9trn is to be shared, it may put pressure on the naira and also affect the price of fuel.
Rather than sharing the entire N1. 9trn, the governors, it was learnt agreed that N900bn should be shared while the balance of N1trn should be transferred to the Central Bank of Nigeria to shore up the nation’s external reserves.
Figures obtained from the Central Bank of Nigeria showed that as of July 18, Nigeria’s external reserves stood at $33.99bn
The governor said, “The N1.9trn revenue is true. But we won’t be sharing all. FAAC will only be sharing N900bn and keep the rest with CBN. The fear is that sharing all will further push inflation and put pressure on the dollar, which will in turn push further the fuel price.
“The governors have agreed with the proposal made by the Presidency not to share all the money. The idea is to help the CBN raise the foreign reserve up to $40bn from the current $33bn.”
The revenue of N1.9trn is the highest amount generated in one month in the history of Nigeria.
The amount almost tripled the N786.161b shared in June and more than tripled the N655.93bn in May.
Allocations are usually shared from the preceding month’s revenue — meaning June will be shared in July.
Statutory collections make up N1.7trn of the federally collected revenues, followed by N293bn from Value Added Tax and N12bn from electronic money transfer charges.
The fall in the official exchange of the naira might have contributed to the seemingly unprecedented rise in revenue.
It was learnt that FAAC adopted N436.38 to a dollar as the exchange rate for the calculation of the forex component of federally-collected revenues for June 2023, but this has now gone up to at least N750 to dollar.
Members of FAAC will be meeting in Abuja today to share the N900bn which was endorsed by the governors last night.
Some of the agencies remitting funds to the federation account are the Federal Inland Revenue Service, and the Nigeria Customs Service among others.
The FAAC committee is made up of commissioners of finance from the 36 states of the federation; the Accountant-General of the Federation, representatives of the Nigerian National Petroleum Company Ltd, the Revenue Mobilization Allocation and Fiscal Commission, CBN and Customs
The federation account is currently being managed through a legal framework that allows funds to be shared under three major components – statutory allocation, Value Added Tax distribution; and allocation made under the derivation principle.