The disbursement from the Federal Accounts Allocation Committee (FAAC) to the federal government, states and local government in 2023 reached N15.1 trillion representing an increase of 29.05% when compared to the figure for 2022.
The total FAAC disbursement for 2022 stood at N11.7 trillion according to the NESG macro-economic outlook for 2024. The outlook noted that the increase of N3.4 trillion in FAAC distributable revenue for 2023 is due to the fuel subsidy removal around the end of May 2023.
According to the report, between January and May 2023, FAAC revenue stood at N5.2 trillion. However, between June and December, the FAAC recorded revenues of N9.9 trillion.
While the increase in FAAC revenue was laudable, the report faulted the federal government’s revenue performance noting that the federal government had an expenditure underperformance of 31.7%.
Furthermore, the report also expressed concern at the bourgeoning debt service as a representation of total expenditure which stood at 45.6% and 80.9% compared to revenue. It faulted the mere 11.6% of revenue attributed to capital expenditure.
Increase in interest rate restricting capital access
- The report further flayed the CBN’s effort at taming rising inflation using monetary policy tools such as increased interest rate stating, “Continuous increases in the policy rate might pose risks, as evidence suggests that it is not effective in curbing inflation but rather restricting capital access, hindering business performance, and potentially straining the financial system.”
In the four MPC meetings of the CBN in 2023, the apex bank increased the interest rate by 2.25% from 16.5% as of December 2022 to 18.75% by the end of 2023. At the same time, inflation continued an upward trend rising from 21.34% as of December 2022 to 28.9% in December 2023.
What you should know
In 2022, Nigeria allocated around N4 trillion on fuel subsidy payments while that for the first six months of 2023 stood at N3.36 trillion.
The removal of fuel subsidy on the assumption into office by President Tinubu pushed more revenues into the government’s coffers.
In June 2023, the FAAC disbursement rose to N1.9 trillion from N701 billion in May. This necessitated President Tinubu to create the Infrastructure Support Fund (ISF) for states to save a portion of the increased revenue.
