Agora Policy, an Abuja-based think tank, says a major contributor to the federation account allocation committee (FAAC) is the foreign exchange (FX) gains.
In a report on Thursday, titled, ‘How Exchange Gain Became a Major Source of Federation Revenue’, Agora Policy said the exchange gain saw an increase after the unification of the foreign exchange (FX) market.
Exchange gain represents the difference between the exchange rate projected in the budget and the actual rate at which applicable revenue streams are converted at FAAC.
The organisation said exchange gain has been a feature of the FAAC overtime.
The FAAC is largely comprised of value-added tax (VAT) and statutory revenue (subdivided into mineral revenue and non-mineral revenue), exchange gain, excess bank charges, and Electronic Money Transfer Levy (EMTL).
Agora Policy said while the other sources have been small, the exchange gain has massively increased in the past year, even surpassing VAT’s contribution to FAAC in two months: June 2023 and February 2024.
According to the report, from May 2023 to April 2024, a total of N4.23 trillion was shared as exchange gain by FAAC, representing 20.14 percent of N20.99 trillion, which was the gross FAAC revenue for the 12-month period.
“It is noteworthy that in February 2024, exchange gain recorded its best performance to date: it brought in N657.44 billion, or 28.26% of the gross FAAC revenue for the month,” the think tank group said.
“However, the picture changed following the foreign exchange reforms that commenced on 14th June 2023 with resultant effect of large spreads between the budget rate and the actual official rate.
“The increasing eminence of exchange gain rubbed off positively on its beneficiaries because they have had more money to share (or would have had much less to share without it).
“The beneficiaries of exchange gain are: the states that earn 13% derivation, and the federal government, all the 36 states and the 774 local government areas that respectively take 52.68%, 26.72%, and 20.60% share of the exchange gain less 13% derivation.
“In FAAC disbursement for January 2024, a sum of N200bn was saved in non-oil excess account from exchange gain.”
