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Home Business & Finance

Exchange Rate Gains Now 20% of FAAC Allocation, Report Reveals

Nnaemeka OkwarabyNnaemeka Okwara
June 8, 2024
in Business & Finance
0
Exchange Rate Gains Now 20% of FAAC Allocation, Report Reveals
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A recent report from Agora Policy has revealed that exchange rate gains have increased significantly, now constituting 20% of the monthly Federal Accounts Allocation Committee (FAAC) allocation. This surge is attributed to the unification of the foreign exchange market in June 2023.

According to the report, between May 2023 and April 2024, exchange rate gains totaled N4.23 trillion, representing 20% of the total FAAC allocation of N20.99 trillion during the period. In contrast, the exchange rate gain for the four years prior to May 2023 was N510.26 billion, a mere 1.32% of the total FAAC allocation of N38.72 trillion.

The report highlights that the average exchange rate gain for the 12-month period was N342.45 billion, a significant increase from the monthly average of N10.63 billion in the four years before April 2023.

The report also notes that exchange rate gains have been compensating for the federation’s inability to meet revenue targets, particularly in the oil sector. Gross FAAC revenue has shown a consistent increase despite regular actual revenue shortfalls.

In April, for instance, the budgeted revenue stood at N2.61 trillion, but an exchange rate gain of N438.88 billion pushed actual revenue to N2.17 trillion, mitigating the revenue underperformance from 33% to 17%.

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  • What they are saying:
  • Why it matters:
  • In Essence:

What they are saying:

“The exchange rate gain has been bailing out the federation on its inability to meet revenue targets, especially in the oil sector.” – Agora Policy Report

“The oil sector is still a major drag on revenue, as mineral revenue experienced a 61% underperformance.” – Agora Policy Report

Why it matters:

The significant increase in exchange rate gains highlights the importance of a unified foreign exchange market in boosting federation revenue.

The report underscores the need for realistic budget projections, as the current projections remain largely unrealistic.

The exchange rate gain has been a double-edged sword for states with significant exposure to USD-denominated debts, increasing their debt service costs.

In Essence:

The report reveals a significant shift in the FAAC allocation, with exchange rate gains now constituting 20% of the total allocation. This surge is attributed to the unification of the foreign exchange market and highlights the importance of a unified market in boosting federation revenue. However, the report also notes that the oil sector remains a major drag on revenue, and states with significant exposure to USD-denominated debts face increased debt service costs.

Tags: AllocationExchange rateExchange Rate Gains Now 20% of FAAC AllocationFAACfederal characterNewsReport Reveals
Nnaemeka Okwara

Nnaemeka Okwara

Okwara Nnaemeka Emmanuel is a skilled wordsmith, passionate blogger, and content writer with a degree in Media Content, He has made a significant mark in the industry. He also holds certification in Marketing and advertising. He has honed a unique blend of creativity and strategic thinking.Driven by a belief in the power of creativity, He has established a niche for himself in diverse regions, leaving a trail of successful projects and satisfied clients. His ability to craft compelling narratives and engage audiences sets him apart in the competitive world of content creation.As a dedicated professional, He continues to push boundaries and set new landmarks in their field. Whether it's through captivating blog posts, persuasive copywriting, or innovative content strategies, Nnaemeka’s consistently delivers excellence, leaving a long lasting impact

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