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The Federation Account Allocation Committee (FAAC) adopted N436.38/$ as exchange rate for the calculation of the forex component of federally corrected revenues for June, TheCable can report.
This was based on the advice of the Central Bank of Nigeria (CBN), a development that did not go down well with the states.
The central bank warehouses the revenues pending distribution.
Typically, federation revenues are shared by the three tiers of government the following month. As a result, May 2023 revenues were shared in June.
However, the forex component of the revenue, which TheCable understands is close to $800 million, was converted at N436.38/$ as against the weighted June average of about N765/$ following the depreciation in the naira.
TheCable understands that the CBN is yet to explain why it opted for N436.38/$ but the states agreed that the revenue be shared all the same so as to be able to settle salaries ahead of the Eid al-Adha Muslim festival.
However, the issue is expected to be discussed after the break.
By some calculation, using N436.38/$ instead of N765/$ led to a shortfall of over N200 billion.
There are no suggestions of fraud, although some state commissioners of finance suspect that the CBN wanted to offset some of its liabilities by using a lower FX rate for FAAC.
The committee had said it shared a total sum of N786.161 billion to the federal government, states and local government areas (LGAs) for May 2023 – up from N655.93 billion in April.
The country’s floating exchange rate – allowing supply and demand in the FX market determine the value of the naira – was implemented on June 14, 2023.
The apex bank, complying with the federal government’s directive, had announced the unification of all segments of the forex exchange (FX) market, signalling the end of its control of the foreign exchange market.
Since then, the exchange rate of the local currency has been determined by market forces.
Typically, devaluation should lead to an increase in revenue allocation to the three tiers of government from the federation account. However, lesser allocation is expected if FAAC’s newly adopted exchange rate is used.
