Despite naira float, FAAC adopts N436.38/$1 FX rate for June

The Federation Account Allocation Committee has adopted N436.38/$ as exchange rate for the calculation of the forex component of federally corrected revenues.

This is based on the advice of the Central Bank of Nigeria, a development that has not gone down well with the states.

Typically, federation revenues collected in a month are shared by the three tiers of government the following month. As a result, May 2023 revenues will be shared in June.

TheCable understands that the forex component of the revenue is close to $800 million, will be converted at N436.38/$1 as against the weighted monthly average of about N765/$ following the depreciation in the naira.

This is contained in the monthly presentation of the Nigerian National Petroleum Company Limited to the FAAC meeting on June 22, 2023.

The committee had said it shared a total sum of N786.161 billion to the federal government, states, and local government areas in May 2023 – up from N655.93 billion in April.

Consequently, the committee will use its new exchange rate, “as advised by Central Bank of Nigeria”, for June’s remittances, according to the report.

The development comes despite the country’s floating exchange rate – allowing supply and demand in the FX market determine the value of the naira – which 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 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.