July 28, (THEWILL) – Total disbursement from the Federal Account Allocation Committee (FAAC) to the 774 local government areas (LGAs) in Nigeria’s 36 states rose by 48.5 percent to N1.69 trillion (year-on-Year) as of June 30,2024, from N1.14 trillion in the corresponding period of the previous year.
Data obtained from the National Bureau of Statistics (NBS) showed that the 744 LGAs received a total of N2.48 trillion from FAAC in June 2024 against NN1.134 trillion in June 2023, an increase of 119 percent.
Further analysis of the report revealed that the highest allocation in 2024 was recorded in January when the LGAs shared N288.93 billion while the least amount was recorded in March with N267.15 billion.
In the case of 2023, a significant jump was recorded in May when the FAAC allocation for the LGAs rose to N213.67 billion from N171.26 billion in April of the same year, representing an increase of 24.7 percent after the devaluation of the Nair a on June 14, 2023. This majorly accounts for the surge in the FAAC allocation to the three years of government (Federal, State and LGAs).
On face value, the federal, state and local government councils are harvesting an incredible volume of FAAC revenue which is largely attributed to the removal of fuel subsidy by the federal government in May 2023.
However, a closer look at the state of the nation’s affairs would reveal that the source of the ‘voluminous’ naira is the depreciation of the local currency which has lost over 200 percent of its value in the past 12 months. This is more so when the high cost of debt servicing and the secret monthly subsidy are factored in.
In real terms, the federal, state and local government councils are receiving a relatively ‘worthless’ volume of the naira which has lost a significant chunk of its value.
As of June 13, 2023, the naira exchanged N471.67 at the Autonomous Foreign Exchange Market (AFEM) and N768 at the parallel market. On the abolition of the multiple exchange rate windows, which signified the devaluation of the naira, on June 14, 2023, the local currency slumped to N664.04/$1 on the same day, representing a depreciation of 40.78 percent in one swoop.
This triggered a roller-coaster trend for the naira which suffered intense volatility that the monetary policy authorities have lost control of. As of Friday, July 26, 2024, the naira exchanged N1,609.29 at the official window.
This implies that the naira has lost N1,147/62 representing 243.3 percent .With inflation rate hitting a 28-year high of 34.19 percent in June, from 33.95 percent in May, according to recent report by the National Bureau of Statistics (NBS), it becomes obvious that the federal, state and local government councils are carrying huge volume of naira with less value, in real terms.
Price pressures have left millions of Nigerians grappling with the worst cost of living crisis in decades as they struggle to meet their basic needs.
To ease the pressure on workers, the federal government has approved a new minimum wage ofN70,000
“With insecurity continuing unabated and farmers abandoning their farms to live in the IDP camps, trucks conveying food items spend two weeks from the North to Lagos, for instance, while most of the items become damaged before arrival, it is doubtful what the government can do under the circumstance without addressing the major causes of the abnormally high inflation – fuel subsidy, high exchange rate and insecurity”, said Joseph Akor, a food merchant.
An Economist, Benjamin Ogar, said, “If the government is paying subsidy on imported refined petrol, and servicing our huge debts regularly, and our oil production is less than 1.3 million barrels per day – far less than our OPEC allocated quota, it shows that the huge FAAC revenue comes mainly from the devaluation of the Naira.”
Gabriel Ogbechie, Chief Executive Officer (CEO) of Rainoil Limited, in April 2024, said the Federal Government spends N600 billion on petrol subsidy monthly.
Ogbechie, who spoke during the Stanbic IBTC Energy and Infrastructure Breakfast Session held in Lagos, insisted that contrary to the claim by the government that subsidy on petrol “is gone”, the authorities resumed petrol subsidy following the devaluation of the naira in the foreign exchange (FX) market
He said that with the current daily consumption rate at 40 million litres and the FX rate at N1,300, then the government’s subsidy per litre on petrol falls between N400 and N500.
“If you look at what our daily consumption say, conservatively 40 million litres a day if you’re spending N500, that’s at least N20 billion every day, N600 billion every month or N7.2 trillion depending on how you look at it. So subsidy is definitely back on petrol.
“If you want to know where petrol should be, just look at where diesel is. Diesel is about N1300, Petrol is selling for N600. So I can tell you for free top of my head, there is at least N400 or N500 per litre subsidy on petrol today,” he said.
The Federal Government later denied that N5.4 trillion provision was made for fuel subsidy in 202 after it had been included in the document prepared by the Finance Minister for the President’s consideration in determining the new minimum wage for the workers.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
