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Thursday, May 13, 2021

Nigerian States Heavy Dependence on FAAC Allocation Improved Modestly in 2020

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Nigerian states were less dependent on Federation Account Allocation Committee (FAAC) allocation in 2020 as the contribution of FAAC to total revenue of all 36 states and FCT improved from around 64.96 percent in 2019 to 63.72 percent in 2020, representing a drop of around 124 basis points according to data obtained from National Bureau of Statistics (NBS).

Unfortunately, this improvement did not arise from a growth in Internally Generated Revenue (IGR) by States, rather, it was a product of the decline in FAAC allocation dropping faster than the reduction in IGR during the year.

According to NBS, State FACC allocations dropped from N2.47 trillion in 2019 to N2.39 trillion in 2020, representing a decline of around 3.2 percent or N80 billion less than States received the previous year. For the IGR, the States generated a combined N1.3 trillion in 2020 compared to N1.33 trillion generated in 2019 which represents a decline of around 2.3 percent which was slower than the decline in FAAC allocation.

On a State-by-State basis, there was no significant improvement in FAAC dependence among States. In both 2019 and 2020, only 3 states saw FAAC allocation contribution to their total revenue at less than 50 percent. The 3 States were Lagos, Ogun and FCT. However, a closer look at these 3 States reveals revenue growth was not across board in all States in 2020.

Lagos recorded the lowest contribution of FAAC allocation to total revenue as FAAC contribution contracted further from 22.82 percent in 2019 to 21.67 percent in 2020. Total Revenue in Lagos reached N534.9 billion with contribution of N115.9 billion from FAAC allocation while IGR brough in a whooping N418.9 billion for Nigeria’s most prosperous state. This is a significant improvement from the N516.6 billion recorded as total revenue in 2019, representing a growth of around 3.5 percent in total revenue.

Despite the prolonged city lockdown and EndSARS protests that crippled the city’s economy for weeks and days respectively in 2020, State IGR grew from N398.7 billion in 2019 to nearly N418.9 billion in 2020, a growth of around 5.1 percent or N20.2 billion.

Lagos’ national dominance in IGR collection in 2020 strengthened as the State accounted for up to 32 percent of all IGR collected in the country compared to around 30 percent in 2019.

In Ogun State, FAAC contributed 42.61 percent in 2020 compared to 35.31 percent it contributed in 2019 as total revenue dropped from N109.6 billion in 2019 to N88.4 billion in 2020. Ogun saw its IGR drop from N70.9 billion in 2019 to N50.7 billion in 2020 while FAAC allocation reduced at a slower pace from N38.7 billion in 2019 to N37.6 billion in 2020.

In FCT, FAAC contributions to total revenue dropped from 49.09 percent in 2019 to 42.15 percent in 2020. Total revenue improved from around N146.5 billion in 2019 to N159.1 billion in 2020. This was achieved by a significant improvement in IGR from N74.6 billion in 2019 to N92 billion in 2020. FAAC allocations dropped from around N72 billion in 2019 to N67 billion in 2020.

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