Nigeria Economic Update (Issue 14)

The Federation Account Allocation Committee (FAAC) disbursed the sum of ₦647.35 billion to the federal, state and local of governments in February which is 9.6 percent lower than the ₦716.30 billion disbursed in January1,2. Disaggregated data shows the federal, state, and local governments received ₦267.39 billion, ₦176.92 billion, and ₦132.94 billion respectively. This decline comes as a result of a decline in revenue generated due to the fall in oil prices associated with the coronavirus pandemic. Relatedly, the federal government has revised the 2020 budget in order to account for a decline in oil revenue which includes a 20 percent cut in capital projects. Going forward, there would be a further decline in the federal allocation as the mainstay of the government’s revenue is hit by the pandemic. Sub-national governments should endeavor to generate substantial revenue to free them from the volatilities of oil prices. Aside from tax, the government should leverage on the pandemic by equipping locals to boost the production of domestic commodities in import-substitution sectors.