FG, States, LGs Share N4.9tn in Q1 as FAAC Allocation Rises by 44.7%

Emmanuel Addeh in Abuja 

The federal, state and local governments shared a total of N4.95 trillion in the first quarter of 2025, rising by N1.53 trillion when compared with the N3.42 trillion revenue disbursed within same period in 2024, a THISDAY computation of Federal Account Allocation Committee (FAAC) data, has shown.

FAAC is the body responsible for the monthly distribution of Nigeria’s federally collected revenue to the three tiers of government, mainly from oil exports, taxes, customs duties, Value Added Tax (VAT), exchange rate gains, and other sources like the Electronic Money Transfer Levy (EMTL).

In Nigeria’s current FAAC sharing model, the revenue is distributed using a constitutionally set formula for the federal government, state governments, and  local governments. 

A review of the data for the first three months of this year indicated that in January 2025, all the tiers of government shared a total of N1.7 trillion from the Federation Account, while in February and March, the federal government and the sub-national governments got N1.67 trillion and N1.57 trillion respectively, to hit approximately N4.95 trillion.

This figure was markedly higher than the N3.42 trillion disbursed in Q1, 2024 by about 44.7 per cent, according to a THISDAY review. A breakdown of the data showed that in January, February and March 2024, allocation to the three tiers of government were N1.15 trillion, N1.152 trillion and N1.12 trillion respectively.

The FAAC allocations to the federal, state, and local governments in Nigeria have been rising recently for several interconnected reasons, with the biggest driver being the floating of the naira and the resulting exchange rate depreciation.

Since mid-2023, the Central Bank of Nigeria (CBN) adopted a more market-driven exchange rate system. Oil sales, which are priced in US dollars, now yield much higher naira value when converted. 

Besides, there has been an improvement in oil production levels compared to the very low outputs seen in 2021 and 2022 and 2023 as security operations around oil pipelines and facilities have slightly reduced oil theft and vandalism. So, with higher production comes more royalties and petroleum profit taxes for the federation account.

In addition, the removal of fuel subsidies in 2023 helped to boost FAAC allocations, since a large chunk of oil earnings was used to pay for petrol subsidies before anything was shared.

In the non-oil sector, revenues have also been growing. Agencies like the Federal Inland Revenue Service (FIRS) and Nigeria Customs Service (NCS) have been more aggressive in tax and customs duty collection. Improvements in VAT collections, electronic transaction taxes and company income tax have increased the share of revenues.

The N1.703 trillion distributable revenue for January this year, included N749.727 billion in statutory revenue, N718.781 billion in VAT revenue, N20.548 billion from the Electronic Money Transfer Levy (EMTL), and N214 billion in augmentation.

In February, the N1.678 trillion shared comprised N827.633 billion from statutory revenue, N609.430 billion from VAT, N35.171 billion from EMTL, N28.218 billion from solid minerals revenue, while there was an augmentation of N178 billion.

In the same vein, the key components of the March 2025 distribution were: Statutory revenue of N931.325 billion, VAT revenue which totalled N593.750 billion, N24.9 billion EMTL and N28.711 billion exchange difference revenue.

Besides, a further breakdown showed that within the period under consideration, the federal government got N1.65 trillion, the states received N1.68 trillion while N1.232 trillion was disbursed to the local governments. The Niger Delta states also received a separate 13 per cent in oil derivation revenue.

The monthly sharing of revenue in Abuja by the  FAAC has been criticised for creating a heavy reliance on oil, making Nigeria vulnerable to global price changes and causing instability for state and local governments that depend on it. 

Furthermore, the FAAC model has encouraged inefficiency and mismanagement, with state and local governments receiving significant monthly allocations, with no incentive to generate revenue locally or improve internal governance as well as transparency.