Naira devaluation pushes FAAC disbursement to N2trn in Q3 — highest in 2020

The federation accounts allocation committee (FAAC) disbursed a total of N2.054 trillion to the three tiers of government in the third quarter of 2020.

This is contained in the quarterly review report released by the Nigeria Extractive Industries Transparency Initiative (NEITI) on Tuesday.

A breakdown showed that the federal government received N812.22 billion, N676.5 billion to state governments, and N429.16 billion to local governments.

This is the first FAAC allocation in 2020 to hit the N2 trillion mark.

It is also 5.6 percent and 6.2 percent higher than the disbursements made in the first and second quarter respectively.

In the first quarter of the year, a total disbursement of N1.945 trillion was made while N1.934 trillion was shared in Q2 2020.

The report noted that the increased allocation is as a result of exchange rate adjustment by the Central Bank of Nigeria (CBN).

“The total amount disbursed in the third quarter of 2020 was the first time that total disbursements exceeded N2 trillion in 2020,” the report reads.

“Important to note here is that the Central Bank of Nigeria adjusted the official exchange rate from N360/$1 to N380/$1 in early August. Since the revenue from FAAC is disbursed in naira, this necessarily means that more funds will be disbursed in months after the adjustment.”

The CBN has had to devalue the naira twice in 2020; first from N306/$ to N360/$ and from N360/$ to N380/$.

This development sustains a trend that third-quarter disbursements are always higher than disbursements in either the first or second quarter of the year.

With the exception of 2018, FAAC disbursements between 2015 and 2019 were highest in the third quarter

This is attributed to “increased demand for oil during the summer season, and the attendant surge in oil prices”.

Despite the increase in allocations within the year, the Q3 2020 disbursement is lower when compared to Q3 2018 and 2019.

The N2.054 trillion disbursed in Q3 2020 was 9.6 percent lower than the N2.273 trillion disbursed in the third quarter of 2019 and 9.8 percent lower than the N2.278 trillion disbursed in the third quarter of 2018.

NEITI explained that the dip in disbursements “was largely on account of the impact of COVID-19 and its associated effects on demand for oil, oil prices, economic activities and other sources of revenues”.

On total net FAAC disbursement, Osun received the lowest net disbursement (N9.39 billion), while Delta received the highest disbursement (N43.08 billion).

For deductions, Yobe had the lowest deduction of N81.98 million, while Lagos had the highest deduction of N17.35 billion.

The deductions of Lagos state were higher than the combined total deductions of 20 states: Yobe, Sokoto, Borno, Jigawa, Kebbi, Katsina, Anambra, Enugu, Ebonyi, Adamawa, Kano, Nasarawa, Kwara, Taraba, Niger, Edo, Abia, Kogi, Kaduna, and Rivers which totalled N15.72 billion.

The report also projected that actual oil revenue will outperform projected oil revenue for the fourth quarter although all tiers of government may struggle to meet their revenue projections..