State governments receive N484.9b from FAAC in Q2

•VAT accounts for 37% of amount earned
•Three-month ecological fund amounts to N7.26 billion

The 36 state governments received a total of N767.05 billion in net value from the Federation Account Allocation Committee (FAAC) in the second quarter (Q2) of the year.

The amount came from different components of the account, including statutory allocations, 13 per cent share of derivation and electronic money transfer levy. Others are ecological funding and the value-added tax (VAT).

The payment is the net value due to the states after deductions such as transfers of 50 per cent of the ecological fund to the Niger Delta Development Commission/Hydroelectric Power Producing Areas Development Commission (HYPPADEC) as well as other obligations the state governments are committed to.

It is also exclusive of the share of the local government councils under their control in line with the horizontal fiscal sharing formula.

According to data sourced from the Federal Ministry of Finance, the National Bureau of Statistics (NBS) and other relevant agencies, the largest share was received in June when the 36 states went home with N264.6 billion.

In April, N262.46 billion was due to the second tier of government while the amount dropped to N239.99 billion in May. VAT earnings contributed the bulk of the receipt, totaling N281.72 billion or 37 per cent of the entire money due to the states from the common resource pool.

In April and May, the state governments received N101.2 and N82.3 billion as a share from VAT earnings while the amount stood at N98.26 billion in the last month of the quarter.

Approximately N7.26 billion also came from the share of the sub-national entities from the ecological fund. The ecological fund was created in 1981 through the Federation Account Act as a special intervention fund to address the various environmental challenges in communities across the country.

But some stakeholders have balked at the efficiency of the management while calling for a broad-based probe of the utilisation of past disbursements.

Earlier in the year, the House of Representatives launched an investigation and called on the Ministry of Finance to spot allocations to the National Emergency Management Agency (NEMA), National Agency for the Great Green Wall, the North-East Development Commission and the National Agricultural Land Development Authority pending the outcome of its investigation.

Apart from the states, local governments (LGs) also receive a sizable portion of the ecological fund, which is to be channeled to addressing environmental challenges across the country.

In June, for instance, about N1.7 billion was received by LGs as their share of the fund. The amount translates to almost N174.15 billion they share from FAAC in the month.

LGs’ total receipts in Q2 stood at N487.5 billion. The amount spread accordingly – June (N174.15 billion), May (N147.35 billion) and April (N165.98 billion). Thus, monthly allocation per local government averaged N209.5 billion.

Most councils rely on FAAC allocations, which are routed through state governments (who are often accused of underhand dealing in the utilisation of the funds), for salary payment and other financial commitments as internally-generated revenues (IGRs) are almost nonexistent at that level of government.

The increasing underdevelopment of rural communities across the country has continued to raise questions about the effectiveness and funding process of the tier of government.