FX Liberalisation May Increase FAAC Allocation To States By 20%

FX Liberalisation may increase FAAC allocation to States by 20%, NewsOnline Nigeria learnt.

 

NewsOnline reports that the new FX liberalisation will potentially increase federal allocation to states by about 15% to 20%, as the dollar component of the government revenues settle into the federation account at the new official rate. The Federal Account Allocation Committee (FAAC) is responsible for monthly distribution of revenue – mainly from oil and value added tax (VAT) among others –  to state governments based on a basket of predetermined sharing formula.

 

Economic Analyst, Razaq Abiola said the Central Bank of Nigeria’s exchange rate unification should “hopefully help some of the states to clear their salary arrears and also free up some funds for the Federal Government of Nigeria (FGN) for infrastructure spending, with hope that it should also slightly improve the debt service ratio of the government, as it creates an artificial boost to revenue numbers.

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Director of the Centre for Promotion of Private Enterprise (CPPE), Muda Yusuf, agreed with Abiola’s position but added that  “a minimum of additional  N3 trillion should go to the federation account every year.”

 

the CPPE Director had, in his earlier statement he shared with Prime Business Africa (PBA), argued that CBN’s rate unification would increase government revenue by a minimum of N4 trillion through additional remittance of exchange rate surplus to the  federation account.