The Federation Account Allocation Committee (FAAC) revenue surged to N6.28 trillion in the second quarter of 2024, primarily fueled by robust collections from Value Added Tax (VAT), customs, and excise duties, which together made up 72.42% of the total earnings.
According to the Central Bank of Nigeria’s latest economic report, non-oil revenue reached N4.55 trillion, marking a substantial 32.22% increase from the previous quarter and surpassing government targets by 23.07%. The uptick is largely credited to higher VAT collections and other independent revenue streams.
Declining Oil Revenue
In contrast, oil revenue growth was modest, contributing only N1.73 trillion, or 13.23% of FAAC’s total earnings in Q2. Oil revenue fell short of government targets by 67.30%, a shortfall driven by challenges in achieving Nigeria’s production target of 2 million barrels per day (bpd). Instead, production averaged just 1.27 million bpd in Q2, down from 1.3 million bpd in Q1, amid issues like oil theft and pipeline vandalism in the Niger Delta.
Previously a cornerstone of government revenue, oil earnings are now supplemented by VAT and duty collections as primary sources of FAAC contributions. Oil revenue in FAAC includes royalties, Petroleum Profit Tax (PPT), and Corporate Income Tax (CIT) from upstream operations.
Policy Shifts and Reforms
The growing reliance on VAT and customs duties signals a significant shift in Nigeria’s revenue approach. Traditionally, oil revenues were allocated among the federal government, states, and local governments, with a 13% derivation for oil-producing states. However, the recent tax reform bill aims to extend this derivation model to VAT, allowing states with higher VAT collections to receive a larger share of FAAC funds.
This proposed shift has generated debate, particularly among leaders in the northern regions who fear reduced allocations under the new structure.
As the government pushes for increased oil production, further FAAC revenue growth remains a possibility in the coming months.
