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Tag: FAAC

  • FG, states, LGs share N1.19tr August, September allocations

    FG, states, LGs share N1.19tr August, September allocations

    The Federation Account Allocation Committee (FAAC) yesterday approved and disbursed a whopping N1.196 trillion to the three tiers of government for the months of August and September.

    According to the spread sheet made available to journalists at the end of the much awaited twin FAAC meeting for the months of August and September 2013, the net statutory disbursements to the federal government was N484,429,000,000 or (52.68%); the 36 states and the Federal Capital Territory (FCT) N245,708,000,000 or (26.72%) and the 774 local government areas, including the six area councils of the FCT N189,431,000,000 or (20.6%).

    To make up the N1.19 trillion windfall for the governments, N127,661,000,000 was distributed between the federal government (N19,149,000,000); states (N63,831,000,000) and local governments (N44,682,000,000) as proceeds of the value added tax (VAT) for the two months.

    N35,549,000,000 was shared from the Subsidy Reinvestment and Empowerment Programme (SURE-P) by all the tiers of government and an additional N7,617,000,000 from the continued monthly instalmental payment from the Nigeria National Petroleum Corporation (NNPC).

    Addressing journalists at the end of the meeting, the Minister of State for Finance and Chairman of FAAC, Dr. Yerima Lawan Ngama, said the committee approved the August and September accounts.

    Speaking further, Ngama said the month of September witnessed a drop in the amount of revenue which accrued into the federation account by N22.783 billion “due to the slight decline in crude oil production as a result of Force Majeure declared at Brass Terminal, maintenance issues and theft.”

    By this development, only the actual accruals into the federation account was shared for the two months as earlier agreed by all the parties, thus bringing to an end the culture of augmenting monthly allocations which fell short of the budgeted sum for the month.

    The minister also disclosed that the NNPC had made 27 monthly instalmental payment of N7.617 billion to FAAC as agreed. As a result, the corporation has only six more instalmental payments to make to offset all that it owes FAAC.

    After the meeting, the state governments expressed concern at the Central Bank of Nigeria’s (CBN) directive of 50 per cent compulsory public sector deposits to banks, saying that the sates are not comfortable with the CBN’s directive.

    Speaking to journalists after the FAAC meeting, the Chairman of Commissioners forum, Barrister Timothy Odaah, said the apex bank’s directive was “giving states harsh experience as banks are no longer eager to extend facilities to states without the say-so of the CBN among other negative effectives to the investment desires of the states and the fact that they now have to pay higher interest when they borrow from the money market.

    Odaah hinted that the state governors would present their misgivings on the compulsory deposit to President Goodluck Jonathan at the next National Executive Council (NEC) meeting, to look for possible ways to bale the states out of economic difficulties.

  • FG, states, LGs share N1.19tr for August, September

    FG, states, LGs share N1.19tr for August, September

    The Federation Account Allocation Committee (FAAC) on Friday approved and disbursed a whooping N1.196 trillion to the three tiers of government for the months of August and September.

    According to the spread sheet made available to journalists at the end of the much awaited twin FAAC meeting for the months of August and September, the Net Statutory disbursements to the federal government was N484,429,000,000 or (52.68 per cent); the 36 states and the Federal Capital Territory (FCT) N245,708,000,000 or (26.72 per cent) and the 774 Local Government Areas including the six Area Councils of the FCT N189,431,000,000 or (20.6 per cent).

    To make up the N1.19 trillion windfall for the governments, N127,661,000,000 was distributed between the federal government (N19,149,000,000); states (N63,831,000,000) and local governments (N44,682,000,000) as proceeds of the Value Added Tax (VAT) for the two months.

    Also N35, 549,000,000 was shared from the Subsidy Reinvestment and Empowerment Programme (SURE-P) by all the tiers of government and an additional N7, 617,000,000 from the monthly payment by the Nigeria National Petroleum Corporation (NNPC).

    Addressing journalists at the end of the meeting, the Minister of State for Finance and Chairman of FAAC Dr. Yerima Lawan Ngama, said the committee approved the August and September accounts.

    Ngama added that the month of September witnessed a drop in the amount of revenue which accrued into the federation account by N22.783 billion “due to the slight decline in crude oil production as a result of Force Majeure declared at Brass Terminal, maintenance issues and theft.”

     

  • War in FAAC

    War in FAAC

    •NNPC should open its book for public scrutiny; states should develop their IGR to reduce dependence on federation account

    Nothing better illustrates the dependent nature of the nation’s federalism than the perennial row between the 36 states and the Federal Government, over the sharing of national revenue. On September 13, the Federal Accounts Allocation Committee (FAAC) meeting held to consider and approve the statutory distribution of revenue for the month of August ended in a deadlock. Again, on Monday, last week, another meeting also ended similarly without the issue being resolved.

    At the heart of the dispute is the N140 billion shortfall – an amount representing the differential between the projected revenue and the actual revenue earned for the first seven months of the year. The Office of the Accountant-General of the Federation had after the botched Monday meeting issued a statement that efforts were being made to get N75bn from the NNPC to pay the shortfall.

    The issue revolves around the projected revenue of N702.54bn for the three tiers of government in the 2013 Appropriation Act. In January, the three tiers could only realise N651.26bn revenue; February was even worse with only N571.7bn netted into the treasury. Although a modest improvement was recorded in March with N595.71bn, it was mixed fortune for the four months of April, May, June and July: the revenues came to N621.07bn, N590.77bn, N863.02bn and N497.98bn, respectively. That development prompted the Minister of State for Finance, Dr. Yerima Ngama, to announce earlier in the month that revenues would, from October, be shared on the basis of actual amount earned rather than what was budgeted.

    We must say here that the best argument that the states have made for pushing their position is that the budget instrument – the 2013 Appropriation Act –lays out the basis for the revenue accrual based on production volume and the benchmark price for the nation’s crude. While that law assumes that production and price would go pari pasu, the reality however is that production has fallen short due to massive oil theft and associated production shut-ins.

    Asking the Federal Government to carry the can – or asking that the shortfalls be charged to the Excess Crude Account (ECA), as the states are wont to do, vide their demand for augmentation of the shortfalls, in our view, skirts around the issue. Suppose there was nothing in the ECA, would the states still have demanded augmentation from the Federal Government?

    The primary challenge is to stop the menace of oil theft or at least reduce it to the barest minimum. The challenge is beyond the ad-hoc committee for the mitigation of oil theft headed by the Delta State Governor, Emmanuel Uduaghan. A more permanent framework for dealing with the menace is what is recommended, which unfortunately, the Federal Government appears to lack the nerve to undertake.

    Once again, the development has brought into sharp focus the activities of the Nigerian National Petroleum Corporation (NNPC), particularly its opaque accounting responsible for short-changing of the federation account. What we have today is a national oil corporation that sees itself as not answerable to anyone; one that does as it pleases and one with such immense powers as to be able to hold the beneficiaries of the federation account, save the Federal Government, to ransom. FAAC members obviously need to do more than the loud, occasional whispers only in the event of shortfalls at their monthly meetings. We expect them to put greater pressure on the National Assembly to get the NNPC to throw its book open for better scrutiny since attempts to get it to act responsibly have met with a brick wall.

    The greatest lesson from the ruckus is the need for the states to grow their internally generated revenues to wean their dependence off the federation account. Relying on the federation account to pay salaries and remuneration of staff is not only unhealthy; it is the surest recipe for disaster, as the states may have learnt to their regret in the last few weeks.

     

  • Foreign exchange inflows drop to $3.2b

    Foreign exchange inflows drop to $3.2b

    The Federation Account Allocation Committee (FAAC) vote between January and last month was N3.3 trillion, analysts at Standard Chartered Bank (SCB) have said.

    The figure represented an increase of 13.74 per cent against that of the same period in 2011.

    Regional Head of Research, Africa at SCB, Razia Khan said in an emailed report titled: ‘Nigeria – The political cycle and policy’ that the FAAC hike may be seen as further evidence that Nigeria’s political cycle is starting to have more of an influence. She also ruled out possibilities of carrying out Gross Domestic Product (GDP) rebasing before 2014, a process that will enhance the economy.

    She said despite the success of Nigeria’s recent Eurobond issuance and a reduced domestic issuance calendar for third quarter, concerns persist over the broader fiscal backdrop.

    “Even improved budget implementation is a source of concern. Commentators are unsure if this reflects more efficient spending, or pressure to spend more. In first quarter of 2013, government revenue was reportedly 12.6 per cent lower, while spending rose 15 per cent,” she said.

    Khan explained that increased military spending following the state of emergency in the Northeast should be met by a contingency reserve adding that further escalation may put pressure on spending plans.

    She said Nigeria’s $284 billion GDP is expected to be rebased by early 2014, a process that will lead to about 40 per cent upward revision in the country’s national income.

    The GDP is the market value of all final goods and services produced within a country, calculated using product, income and expenditure approaches. The real GDP is one that is adjusted for inflation while nominal GDP is the value of goods and services based on current market prices.

    Khan said in the near-term, Nigeria economy faces some risk which may lead to growth slipping to six per cent. She said although rebasing of the GDP will support the much needed growth and provide analysts with more accurate sectoral shares, it will not happen until 2014.

    Khan also expressed concerns about Nigeria’s political cycle and spending pressures. “There is a risk that elections, due in 2015, are brought forward, allowing for any legal disputes to election results to be settled ahead of a May 2015 transition. If this is the case, spending may rise meaningfully ahead of party primaries which would be held in early half year 2014,” she said.

    She said weaker oil output relative to ambitious budget targets risks fiscal deterioration, with Nigeria dipping into its oil savings. With only modest spending increases envisaged in 2013, a budget deficit of 2.17 per cent was initially forecast.

    However, oil production, reportedly averaging 2.1 to 2.2 million barrels per day (mbpd), has fallen short of the 2.53 mbpd assumed in the 2013 budget. In June, output may have hit a low of 1.9mbpd. This, she insisted, has necessitated more frequent augmentation of revenue from Excess Crude Account (ECA).

    “Dipping into oil savings to finance spending may result in a narrower budget deficit for 2013. Despite the success of Nigeria’s recent Eurobond and a reduced domestic issuance calendar for third quarter 2013, concerns persist over the broader fiscal backdrop,” she said.

    Khan explained that given anticipated pressure on future inflation, forecast of a 100 basis points (bps) rate hike in first quarter of 2014, followed by hikes of 50bps each in third quarter and fourth quarter 2014, with the interest rate raised to 14 per cent by end of 2014 is a possibility.

    Nigerias plans to change its GDP base year to 2008 from 1990, thereby boosting its nominal GDP. By carrying out the exercise, Nigeria will be emulating Malaysia and South Africa which rebased their GDPs from 2000 to 2005 each and Ghana from 1993 to 2006.

    The Gross National Product (GNP) measures the value of goods and services produced by a country’s citizens regardless of their location while Gross National Income (GNI) is GDP plus income receipts minus income payments from the rest of the world.

     

  • FAAC Q2 vote hits N3.3tr

    FAAC Q2 vote hits N3.3tr

    The Federation Account Allocation Committee (FAAC) vote between January and last month was N3.3 trillion, analysts at Standard Chartered Bank (SCB) have said.

    The figure represented an increase of 13.74 per cent against that of the same period in 2011.

    Regional Head of Research, Africa at SCB, Razia Khan said in an emailed report titled: ‘Nigeria – The political cycle and policy’ that the FAAC hike may be seen as further evidence that Nigeria’s political cycle is starting to have more of an influence. She also ruled out possibilities of carrying out Gross Domestic Product (GDP) rebasing before 2014, a process that will enhance the economy.

    She said despite the success of Nigeria’s recent Eurobond issuance and a reduced domestic issuance calendar for third quarter, concerns persist over the broader fiscal backdrop.

    “Even improved budget implementation is a source of concern. Commentators are unsure if this reflects more efficient spending, or pressure to spend more. In first quarter of 2013, government revenue was reportedly 12.6 per cent lower, while spending rose 15 per cent,” she said.

    Khan explained that increased military spending following the state of emergency in the Northeast should be met by a contingency reserve adding that further escalation may put pressure on spending plans.

    She said Nigeria’s $284 billion GDP is expected to be rebased by early 2014, a process that will lead to about 40 per cent upward revision in the country’s national income.

    The GDP is the market value of all final goods and services produced within a country, calculated using product, income and expenditure approaches. The real GDP is one that is adjusted for inflation while nominal GDP is the value of goods and services based on current market prices.

    Khan said in the near-term, Nigeria economy faces some risk which may lead to growth slipping to six per cent. She said although rebasing of the GDP will support the much needed growth and provide analysts with more accurate sectoral shares, it will not happen until 2014.

    Khan also expressed concerns about Nigeria’s political cycle and spending pressures. “There is a risk that elections, due in 2015, are brought forward, allowing for any legal disputes to election results to be settled ahead of a May 2015 transition. If this is the case, spending may rise meaningfully ahead of party primaries which would be held in early half year 2014,” she said.

    She said weaker oil output relative to ambitious budget targets risks fiscal deterioration, with Nigeria dipping into its oil savings. With only modest spending increases envisaged in 2013, a budget deficit of 2.17 per cent was initially forecast.

    However, oil production, reportedly averaging 2.1 to 2.2 million barrels per day (mbpd), has fallen short of the 2.53 mbpd assumed in the 2013 budget. In June, output may have hit a low of 1.9mbpd. This, she insisted, has necessitated more frequent augmentation of revenue from Excess Crude Account (ECA).

    “Dipping into oil savings to finance spending may result in a narrower budget deficit for 2013. Despite the success of Nigeria’s recent Eurobond and a reduced domestic issuance calendar for third quarter 2013, concerns persist over the broader fiscal backdrop,” she said.

    Khan explained that given anticipated pressure on future inflation, forecast of a 100 basis points (bps) rate hike in first quarter of 2014, followed by hikes of 50bps each in third quarter and fourth quarter 2014, with the interest rate raised to 14 per cent by end of 2014 is a possibility.

    Nigerias plans to change its GDP base year to 2008 from 1990, thereby boosting its nominal GDP. By carrying out the exercise, Nigeria will be emulating Malaysia and South Africa which rebased their GDPs from 2000 to 2005 each and Ghana from 1993 to 2006.

    The Gross National Product (GNP) measures the value of goods and services produced by a country’s citizens regardless of their location while Gross National Income (GNI) is GDP plus income receipts minus income payments from the rest of the world.

     

  • Fed Govt, states, councils share N718.103b in June

    Fed Govt, states, councils share N718.103b in June

    The three tiers of government yesterday shared N718.103 billion for June.

    Rising from the monthly Federation Account Allocation Committee (FAAC) meeting in Abuja, the Minister of State for Finance, and Chairman of FAAC, Alhaji Lawan Yerima Ngama,  said N623.767 billion was distributed as statutory disbursements.

    He said the Federal Government received N294.038 billion, or 52.68 per cent, state governments received a combined cheque of N149.140 billion, or 26.72 per cent, while the 774 local governments got N114.981 billion, or 20.6 per cent of the statutory disbursements.

    Following the stand-off between the states and the Federal Government last month, there was no augmentation for June, because the May augmentation arrears of N92.436 billion was instead distributed in June.

    He said N7.617 billion was refunded by the Nigeria National Petroleum Corporation (NNPC) as a result of its indebtedness to the Federation Account and distributed in the month of June as well. In addition, N35.549 billion was disbursed to the three- tiers of government under the SURE-P programme.

    Also in June, N51.170 billion was shared between the federal, state and local governments as proceeds from the Value Added Tax (VAT).

    A gross revenue of N863.026 billion was realised for the month, which was higher than the N590.777 billion received for May by N272.249 billion. This increase in revenue, Ngama noted, “was due to an increase in crude oil production following the completion of pipeline repairs in some terminals, and the rush to meet the Company Income Tax (CIT) deadline of June 30, for companies with December 31.”

    Ngama explained: “Lifting operations were still begin affected by the Force Majeure declared at Bonny terminal and continuous theft and vandalism.”

  • Fed Govt mulls bank loans, external borrowing to fund FAAC gap

    The Federal Government may resort to bank loans and ex-ternal borrowings to fund gaps in revenue shared by states under the Federation Account Allocation Committee (FAAC).

    This has become exigent as revenue from oil is dwindling. the Managing Director, Financial Derivatives Company Limited, Bismark Rewane hinted in the July Economic Report published by the firm.

    He explained that total federal allocation shared in the first half of 2013 was N3.3 trillion, about 13.74 per cent higher than the N2.92 trillion shared in the same period of 2012. However, the FAAC in July and the remaining months in the second half of the year is expected to fluctuate within N500 billion to N900 billion.

    He hinted that a decline in the federal allocation was possible, and would have a downside risk to the naira as government battles with ways of bridging funding gaps.

    He said a depreciation of the naira would result in a depletion of the nation’s external reserves and consequently affect the federal allocation, adding that a further decline in oil price is expected to increase the disparity between the approved budget and revenues, leaving government with the option of relying on bank loans, external borrowing to manage the funding gap.

    He said July inflation is estimated at 8.99 per cent against 8.49 per cent in June. This he said will be fueled by increased demand for consumer goods as Ramadan begins. “There was also a decline in average inter-bank interest rates in first and second quarters of the year as they averaged 11.6 per cent and 12.2 per cent per annum respectively. The naira equally depreciated at the parallel and inter-bank markets in first quarter,” he said.

    At the parallel market, the currency declined to N160.5 to a dollar, at the Inter-bank market it depreciated to N158.4 to a dollar while it strengthen at the official market to N155.75 to a dollar.

    He said that exchange-rate stability is threatened by declining revenue. He added that the rate is determined by global oil market movement and oil price volatility, external reserves position, risk of increased fiscal spending among other factors.

    The Financial Derivatives CEO also projected that external reserves are likely to close the year at $43 billion due to declining domestic oil output, vandalism and force majeure, OPEC strict enforcement of quota, fall in global oil price, increased fiscal spending among other factors.

    On the monetary policy, he said the Central Bank of Nigeria (CBN) has three options in dealing with it. He listed the options as proping up the exchange rate through increased interventions and frequent withdrawals from the Excess Crude Account and external reserves; allowing the naira find its true value by widening the target band and by increasing interest rate.

    He said that cards and electronic payments becoming a more acceptable form of transaction settlement due to increased awareness on the cash-less policy adding that cash to card utilisation ratio now stands at 80:20 even as there is growing use of internet for transaction settlement and retail activity.

    He said the banking sector recorded N2.4 trillion per month of electronic payments, while an average of N1.83 trillion cheques were cleared in the first half of 2013.

    He said a depreciation of the naira would result in a depletion of external reserves and consequently affect the federal allocation even as further decline in oil price would increase the disparity between the approved budget and revenues.

     

  • Govt orders orders payment of $1b arrears to states

    Govt orders orders payment of $1b arrears to states

    •FAAC reconvenes today to share cash

    President Goodluck Jonathan has approved the payment of the outstanding $1billion (N160billion) February statutory allocation for states.

    The arrears will be paid immediately, following a boycott of a session on the crisis on Monday at the Presidential Villa.

    The Federation Account Allocation Committee (FAAC) is expected to meet today on the payment modalities.

    It was gathered that the Presidency was shocked by the boycott of the meeting by the 19 governors – an action which many saw as an extension of the Nigeria Governors’ Forum (NGF) crisis.

    According to sources, the Presidency felt holding on to statutory allocation might generate constitutional and legal crises between the states and the Federal Government.

    A governor, who spoke in confidence, said: “The President has agreed unconditionally to release the February arrears on Wednesday. This is why FAAC meeting will hold accordingly on Wednesday on the sharing of the $1billion arrears.

    “By the terms of payment, the May arrears will now be paid in July. It is a good thing that the President has allowed sanity to prevail.

    “Once a budget has been passed, the Federal Government has no right to withhold statutory allocations meant for states and other tiers of government.

    “Some of us were already contemplating going to court to protect our rights because the amount involved is not a charity budget which can be dispensed at will.

    “We boycotted the cash crisis talks to prove a point that once a constitutional right is involved on any issue, states are not expected to go cap in hand to the Federal Government.

    “We felt the meeting was unnecessary because the appropriation law is clear; it has to be implemented.”

    According to the source, who pleaded not to be named, it is good that the President decided to respect the instrument he signed into law. “We can reunite with him once the rights of Federating Units are guaranteed. We have no personal grudge against him,” he said.

    Another governor said: “I am aware that the President has consented to the payment of the February arrears. The President did not even wait for the outcome of the committee raised at his meeting with G-16 on Monday night. He has decided to uphold the constitution.

    “You see, the Minister of Finance, Dr. Ngozi Okonjo-Iweala is the problem because she wants to be in the good book of IMF, World Bank and other international finance institutions.

    “She will always tell the states, I want to have $50 billion or $100billion in foreign reserves. States are not opposed to savings but you do not change the rules in the middle of the game after the budget has been passed.

    “Whatever the nation wants to save at any point in time should have been captured in the budget. This borders on planning and realistic projection.”

    Due to the delay in passing the 2013 budget by the National Assembly, the Federation Account Allocation Committee adopted the 2012 budget benchmark to pay the states.

  • FAAC: FG, states, LGs agree to clear arrears

    FAAC: FG, states, LGs agree to clear arrears

    Following the dramatic walk-out by state commissioners of finance from the last Federation Account Allocation Committee (FAAC) meeting in Abuja last week, the three tiers of government have agreed to clear the controversial arrears that brought about the walk-out.

    Addressing journalists at the end of a meeting initiated by President Goodluck Jonathan to resolve the crisis, the Coordinating Minister for the Economy and Minister of finance Dr. Ngozi Okonjo-Iweala, said the three tiers of government “have agreed on what the arrears are and how much they are and we are going to clear them.”

    She explained that the FAAC accumulated some arrears when trying to put our accounts together and that would be cleared.

    She insisted that there was “no debt and no agreement to sign, it’s a federation account issue we are all in it together.”

    Asked to explain the nature of the arrears and to give the timeline for clearing the arrears, the Minister of State for Finance and Chairman of FAAC, Dr. Yerima Lawan Ngama said “we had shortages in revenue so the amount that we had statutorily reduced for the three tiers of government including the federal government.”

    Earlier, the chairman of the committee set up by the president to resolve the impasse and Governor of Bauchi State Alhaji Isa Yuguda said, “an agreement has been reached on the Federation Account to resolve all outstanding issues to do with the Federation Accounts. As part of this, a commitment to settle the arrears of the Federation Accounts Allocation Committee (FAAC) payments has been agreed.”