The balance in Nigeria’s Excess Crude Account (ECA) has reduced significantly from the $35.7 million it was as of June 2022 to $376,655.09 as at July 25, 2022.
A communiqué issued at the end of the Federation Account Allocation Committee (FAAC) meeting for July 2022, held in Abuja yesterday disclosed this.
But no explanation was given for the huge drop in the ECA. The slump in the ECA came as allocation to the federal, state and local governments increased by N121.624 billion as FAAC shared a total sum of N802.407 billion for June.
The sum of N680.783 billion was shared in the preceding month of May and N656, 602 in April.
However, the rise in June allocation was attributed to tremendous increases in Companies Income Tax (CIT) and Petroleum Profit Tax (PPT), although oil and gas royalties declined marginally.
The communiqué explained that the N802.407 billion total distributable revenue comprised distributable statutory revenue of N608.580 billion and distributable Value Added Tax (VAT) revenue of N193.827 billion.
According to the communique, total deductions for cost of collection was N44.606 billion and deductions for transfers, savings, refunds and 13 per cent derivation to Anambra State was a total sum of N373.200.
The share of the federal government from the total distributable revenue of N802.407 billion was N321.859 billion, the states received N245.418 billion, and the local governments got N182.330 billion.
The sum of N52.799 billion was shared to the relevant states as 13 per cent derivation revenue.
The communique revealed that gross statutory revenue of N1,012.065 billion was received for the month of June 2022.
This was higher than the sum of N589.952 billion received in the previous month by N422.113 billion.
From the N608.580 billion distributable statutory revenue, the federal government received N292.785 billion, the states received N148.505 billion and the local governments received N114.491 billion.
The sum of N52.799 billion was shared to the relevant states as 13 per cent derivation revenue.
In the month of June 2022, the gross revenue available from VAT was N208.148 billion, which was lower than the N213.179 billion available in the month of May 2022 by N5.031 billion.
From the N193.827 billion distributable VAT revenue, the federal government received N29.074 billion, states received N96.914 billion and the local government councils received N67.839 billion.
According to the communiqué, in the month of June 2022, CIT and PPT recorded tremendous increases, while import duty, oil and gas royalties increased marginally.
Excise duties decreased significantly while VAT decreased marginally.
Meanwhile, IMF has advised Nigeria and other African countries to as a matter of urgency take proactive measures to restructure their debts.
The Washington-based institution also retained Nigeria’s projected economic growth for 2022 at 3.4 per cent and that of 2023 at 3.2 per cent, which was an increase of 0.1 per cent compared with the 3.1 per cent it had projected for the country in its World Economic Outlook (WEO) in April.
This was disclosed during the virtual launch of the IMF’s WEO for July 2022 titled, “Gloomy and More Uncertain,’ yesterday.
Nigeria’s Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, last week sounded the alarm bells as she revealed that the country’s debt service cost in the first quarter (Q1) 2022 was N1.94 trillion, N310 billion higher than the actual revenue received during the period.
Elevated debt level has also been the trend in other countries in Africa.
Responding to a question on the rise and looming debt crisis in Africa, the Chief Economist and Director, Research Department, IMF, Mr. Pierre-Olivier Gourinchas said: “On a number of countries when you have a combination of shocks and we’ve experienced shocks upon shocks. We have the pandemic, we have the impact of the war, and elevated energy and food prices that are hitting a number of countries that don’t have really a lot of fiscal space and many of the low-income countries.
“They can get into a situation where their debts are assessed as unsustainable meaning that there are financing gaps and the financing gaps need to be closed and that require having the creditors and the country negotiate a reduction in the claims on the country. That’s what the debt restructuring process means.”
Speaking further, the IMF official said: “And that process is absolutely vital because if you don’t have a reduction in the claims of debt restructuring, then the country is still saddled with unsustainable liabilities that it has to service and is unable to.
“So that process is one that also unlocks once we have restored debt sustainability. It unlocks access to IMF resources and that’s the point at which the IMF can come in and provide some financial assistance.”
According to him, there was need for governments in Africa to adopt proactive measures in addressing their debt challenges.
He added: “So that’s a critical step and a number of countries are actually currently under discussions to reduce their external debt and we can anticipate that others will be doing so.
“It is important that this process happens as quickly as possible and that countries may be proactive in terms of seeking a debt resolution, maybe ahead rather than waiting until it’s too late. That is because when it’s too late, then you really have no policy options and no room. But it’s an important part of the process.
“The IMF has a role to play and we are trying to help both in terms of facilitating debt resolution and also providing the financial assistance that we can, once this is established.”
On his part, the Division Chief, Research Department, Mr. Daniel Leigh said: “The main challenge that we are focusing on is indeed the risk of debt distress.”
The latest WEO further stated that tighter financial conditions could trigger debt distress in emerging market and developing economies.
It states: “As advanced economy central banks raise interest rates to fight inflation, financial conditions worldwide will continue to tighten. The resulting increase in borrowing costs will, without correspondingly tighter domestic monetary policies, put pressure on international reserves and cause depreciation versus the dollar, inducing balance sheet valuation losses among economies with dollar-denominated net liabilities.
“Such challenges will come at a time when government financial positions in many countries are already stretched, implying less room for fiscal policy support, with 60 percent of low-income countries in or at high risk of government debt distress.”
