The Federation Account gained N364.87 billion from Exchange Difference revenue in November 2023, according to the recent communique from the Federation Account Allocation Committee (FAAC).
This is N101.98 billion more than the N262.89 billion it earned from this revenue source in October of the same year.
It means that the unification of the country’s exchange rates has significantly increased government revenue from exchange difference, as the country struggles with naira devaluation.
Sharing Formula
Before an amount is shared between the three tiers of government, there are usually statutory deductions, such as 13% derivation and other charges and costs.
After the deductions, the Federal Government gets 52.68%, State Government gets 26.72%, and Local Government gets 20.60% based on the current vertical allocation formula on the net federation account revenue distributable.
However, out of the 52.68% of the Federal Government’s share, general ecological problems get 1%, Federal Capital Territory (FCT) gets 1%, Development of natural resources gets 1.68%, statutory stabilization gets 0.5%. The balance of 48.5% is for the Federal Government.
Analysis of the communiques from FAAC shows that for October 2023, the N262.89 billion exchange difference revenue was shared as follows:
- “Federal Government received N93.323 billion, the States got N47.334 billion, the sum of N36.493 billion allocated to Local Government Councils, and N25.737 billion given to Derivation (13% of Mineral Revenue) while the sum of N60.000 billion was for Transfers, Intervention and Refunds.”
For November 2023, it was shared as follows:
- “Federal Government received N175.817 billion, the States got N89.177 billion, the sum of N68.751 billion allocated to Local Government Councils, and N31.124 billion given for Derivation (13% of Mineral Revenue).”
Based on the sharing formula, the Federal Government is the biggest beneficiary from this revenue source, getting a total of N269.14 billion in two months.
More Insight
An exchange difference is a difference resulting from translating a given number of units of one currency into another currency at different exchange rates.
About two weeks after President Bola Tinubu promised to unify the nation’s multiple exchange rates, the Central Bank of Nigeria (CBN) decided to float the naira at the Investors and Exporters forex window.
Since then, the naira had been rising and falling, hovering around N750/$ and N950/$.
In a recent report by Comercio Partners Limited, it is stated that:
- “The Naira’s depreciation against the dollar, closing at N789.94/$1 in October 2023 and plummeting further by 19.26% to N942.12/$1 in November 2023, underscores the ongoing challenges within the nation’s FX market.”
The Institute of Chartered Accountants of Nigeria (ICAN) recently said that the unification of the country’s exchange rate would stimulate the growth of the securities market and attract foreign investments into the country.
It also noted that the unification of the exchange rate would increase the government’s revenue in naira terms, which would result in a higher tax/revenue to GDP ratio.
However, while the struggling currency has been beneficial to the Federal Government and banks, it has been harmful to many manufacturing companies in the country that have recorded significant FX losses in their financial statements.
The hardship Nigerians faces since Tinubu became president is alarming inspite of the enormous resources and wealth Nigeria possess; Christmas is around the corner yet people can scsrcely eat a good meal…what is happening? It shows that man can not give man hope not to talk of a renewed hope. Nigerians especially the unemployed ones, the down trodden, the poor, the suffering masses need to rise up against this In justice against humanity. Nigeria is rich, Nigeria is wealthy; it is unnecessary and uncalled for, for nigerians to be suffering and see them japa….is the politicians and political leadership and followership of this country cursed?😎😎😎🤔🤔🤔 Are they cursed????????