Disbursement from the Federal Accounts Allocation Committee (FAAC) in 2023 to the federal government, states, and local government soared to an impressive N15.1 trillion, marking a substantial 29.05% surge compared to the previous year’s figure of 2022.
According to the NESG macro-economic outlook for 2024, the total FAAC disbursement for 2022 was N11.7 trillion. Notably, the outlook attributed the significant increase of N3.4 trillion in FAAC distributable revenue for 2023 to the removal of fuel subsidies around the end of May 2023.
The report highlighted that FAAC revenue from January to May 2023 amounted to N5.2 trillion. However, between June and December, there was a substantial increase, with the FAAC recording revenues of N9.9 trillion during this period.
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While acknowledging the commendable increase in FAAC revenue, the report criticized the federal government’s revenue performance, citing a 31.7% expenditure underperformance.
Furthermore, the report expressed concern about the growing debt service, constituting 45.6% and 80.9% of total expenditure compared to revenue. It particularly noted the modest 11.6% of revenue allocated to capital expenditure.
The report also scrutinized the Central Bank of Nigeria’s (CBN) approach to managing inflation through increased interest rates. It cautioned against continuous rate hikes, emphasizing that such measures might restrict capital access, hinder business performance, and strain the financial system. Throughout the four Monetary Policy Committee (MPC) meetings in 2023, the CBN raised the interest rate by 2.25%, from 16.5% in December 2022 to 18.75% by the end of 2023, coinciding with a rise in inflation from 21.34% to 28.9%.
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In 2022, Nigeria allocated approximately N4 trillion for fuel subsidy payments, while the corresponding figure for the first six months of 2023 was N3.36 trillion. The removal of the fuel subsidy, initiated by President Tinubu upon assuming office, significantly boosted government revenues. Consequently, in June 2023, FAAC disbursement surged to N1.9 trillion from N701 billion in May, prompting President Tinubu to establish the Infrastructure Support Fund (ISF) to enable states to set aside a portion of the increased revenue.
