The Federal Account Allocation Committee (FAAC) disbursed a sum of N601.1bn to the three tiers of government in December 2020. This represents a marginal decline of 0.48% (N2.9bn) compared to the amount shared in November.
This has had no impact on money supply growth. Average FAAC allocation in 2020 is now N644.53bn, 4.24% lower than the 2019 average of N673.07bn. The drop in allocation was largely due to a sharp fall in company income tax (CIT).
Its impact was, however, cushioned by substantial increases in petroleum profit tax, import duty, excise duty, and oil and gas royalties. Gross statutory revenues, which accounted for approximately 73% of total disbursement, increased by 15.42% to N436.46bn while VAT rose by 23.98% to N156.79bn.
Forex equalization revenue amounted to N7.87bn. The balance in the excess crude account was $72.41mn as of December 16.
The sharp drop in CIT could be partly attributed to the effects of COVID-19 on corporate revenues and margins. With the renewed spike in infections, the government is likely to enforce renewed restrictive measures, including a precision lockdown.
This means that CIT could decline further in the coming months. Unemployment is also likely to continue to climb (above 35%) as companies’ lay-off staff to reduce operating expenses.