FAAC: How VAT, forex gain save states from zero allocation

Increasing resort to borrowing by state governments to finance budgets and other needs appears to be taking heavy tolls on their statutory allocations from Federation Accounts Allocation and Fiscal Commission (FAAC), an analysis by Nigerian Tribune has shown.

As a result of this heavy indebtedness, some states have been getting zero allocation from their statutory allocations consisting of revenues from oil & gas, taxes and intakes by Nigerian Customs Service.

Analysis of FAAC documents for December 2016, which was shared in January 2017 and February 2017 shared in March indicated that foreign exchange gains, value added tax and excess petroleum profit tax saved in between July and August 2016 have been the reason why Lagos, Osun and Cross River states got any allocations during the months under review.

For instance, N48.370 billion was shared by federal, states and local governments for the month of February 2017.

The amount was the result of widening differentials between the N190/US$ upon which the 2016 budget was based and whatever it depreciates to.

Also, as a result of most companies rushing to beat the tax filing deadline, there was heavy revenue accruing from petroleum profit tax (PPT) in the months of June, July and August 2016, most of which was kept in a special account.

FAAC has been taking from this account to augment federation account shortfall in the last few months and in March, N60.89 billion was withdrawn and distributed to the three tiers of government.

In March, total amount distributed to all the 36 state governments amounted to N290,163,252,794.57.

Of this amount, N29,908,545,718 or 10 percent was deducted to service various forms of debt including external debts, contractual agreements and other deductions.

Debts under the National Water Rehabilitation Projects, National Agricultural Technology Support Programme, Salary Bailout, Payment for Fertilizer, State Water Supply Project, State Agricultural Project and National Fadama Project are classified as other deductions.

For Cross River State, total statutory allocation distributed in January 2017 was N1.422 billion but when debts were deducted, it still had N136.5 million to settle and this was deducted from its share of VAT, excess PPT and exchange gain.

For Delta State, total statutory allocation was N4.5 billion in the same month.

However, after various debts amounting to N2.269 was deducted, the state was left with only N2.256 billion.

For Plateau State, total amount that it was left with out of its N1.477 billion was N198.0 million before the addition of VAT, excess PPT and exchange rate gain.

It would be recalled that former Governor of Central Bank of Nigeria (CBN) who is current Emir of Kano, Sanusi Lamido recently revealed that governments are nor spending more than 60 percent of revenues on debt service.

Also, Director General of Debt Management Office (DMO) Abraham Nwankwo told a committee of the National Assembly last month that total public debt in Nigeria stands at N17.3 trillion.