FAAC disbursements to FG, states decrease by over 5% in 2020 Q2 ― Report

An analysis of disbursements by the Federal Accounts Allocation Committee(FAAC) to Federal Government (FG) and states has shown a decrease of over five per cent in 2020 second quarter (Q2) compared to what was recorded in the first quarter (Q1).

A total of N1.934 trillion was disbursed in the second quarter of 2020, indicating a 0.55% decrease from the N1.945 trillion recorded in the first quarter of the year.

According to a quarterly review report newly released by the Nigeria Extractive Industries Transparency Initiative(NEITI), the figure shows that total payments to the FG decreased from N791.4 billion in Q1 2020 to N739.2 billion in Q2 2020.

“This is a fall of 6.59%. This represents the biggest change in disbursements to the FGN in the first two quarters of the year for the periods being considered,” it states.

It stated that compared to 2018, disbursements to FG rose from N812.8 billion in Q1 to N839.5 billion in Q2, an increase of 3.29% while in 2019, payment to FG fell from N803.2 billion in Q1 to N795.8 billion in Q2, making a decrease of 0.91%.

The figure shows that total disbursements to the FGN decreased from N791.4 billion in Q1 2020 to N739.2 billion in Q2 2020. This is a fall of 6.59%.

Also, the report stated that the total payments to states fell from N669 billion in Q1 2020 to N629.3 billion in Q2 2020.

“This is a decrease of 5.9%. Comparable figures for 2018 are N683.4 billion (Q1) and N692 billion (Q2), indicating an increase of 1.3%. For 2019, disbursements to states totalled N675.2 billion in Q1 and N660.5 billion in Q2, a decrease of 2.2%,” it stated.

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Also, Local governments reportedly received a total of N375.4 billion in Q2 2020, which was 5.19% lower than the N395.9 billion disbursed in Q1 2020.

It noted that: “For 2018, local governments received N393.4 billion in Q1 and N402.1 billion in Q2. This indicates that disbursements in the second quarter were 3.6% higher than the first quarter. For 2019, disbursements to local governments totalled N398.4 billion in Q1 and N393.9 billion in Q2. This was a fall of 1.2%.”

However, it stressed that the decrease could be attributed to the rebound in oil prices and the adjusted official exchange rate from N306 per dollar to N360 in March.

The total FAAC allocations according to the report, comprise gross disbursements to FG, States, LGs, 13% Derivation, Cost of Collection -NCS, Cost of Collection – FIRS, Cost of Collection – DPR, Refund – NCS, Refund – FIRS, Transfer to NEDC, Transfer to Excess Oil Revenue.

“The fact that this was only a 0.55% decrease from the disbursements in Q1 could be attributed to a couple of factors. First, oil prices have rebounded in the second quarter following the troughs reached in March and April. As the lockdowns of economies have been lifted, the drastic fall in oil prices has eased. This has worked to soften the effects of lower oil demand.

“Second, the Central Bank of Nigeria adjusted the official exchange rate from N307/$1 to N360/$1 in March. This resulted in higher naira disbursements when compared to previous disbursements using the previous exchange rate,” it explained.

Also, it stressed that total disbursements do not consist solely of disbursements to the tiers of government, but include other items adding that the reduction in disbursements to the three tiers of government implies an increase in other items.

It specifically pointed out that a sum of N119.5 billion was transferred to the Excess Oil Revenue Account in April 2020.

Meanwhile, the review put the disbursements in the first half of 2020 at N3.879 trillion.

In a breakdown, N1.53 trillion was paid to FG, N1.29 trillion to state governments, and N771.34 billion to local governments.

The review also found that FAAC disbursements in the first half of 2020 have been volatile when compared to disbursements in similar periods in 2018 and 2019.

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