Reports have shown that the disbursements to states from Federation Account Allocation Committee (FAAC) rose 36 per cent this year to N8.52 trillion.
According to a report from Financial Derivatives Company Limited, a financial advisory and research firm, showed that FAAC allocation released in December rose 3.13 per cent to N812.76 billion.
Arranged annually, the total disbursement to the states stood at 36 per cent (N8.52 trillion) higher than the N6.25 trillion recorded last year.
The report said that despite higher government revenue, the purchasing power of Nigerian consumers has been falling, leading to a slide in headline inflation for most of 2018.
It said: “The biggest threat to macroeconomic stability is the sharp fall (nine per cent) in the price of oil in December to $53.54 per barrel. The increased liquidity due to a higher FAAC disbursement is likely to put pressure on domestic commodity prices over the Christmas break.”
The depreciation of the naira against the dollar, which closed last week at N364/$ at the parallel market also meant that more local currency will be shared among states, as against what obtains at a period of stronger naira.
It said the crude oil prices also lost 11 per cent in the last one week, closing at $53.54 per barrel, and about 46 cents below the budget benchmarks for 2019. Other fundamentals point towards oil prices remaining below $60 per barrel due to increased supply from top producers including Russia.
The external reserves stayed high at $43.13 billion at the close of last week.
According to the Central Bank of Nigeria (CBN), the Nigeria’s over-dependence on crude oil for foreign exchange revenue meant that shocks in the oil market were transmitted entirely to the economy via the forex markets as manufacturers and traders who required forex to purchase their inputs as well as goods, were faced with a depleting supply of foreign exchange in the country.
It said the impact of this decline on our reserves was evident in the rise in the value of the dollar relative to the naira; and a rise in the Consumer Price Index (CPI) due to the increase in the cost of imported inputs and goods.
