BREAKING: FAAC Allocation To FG, States, LG Soars By 43%

Disbursements from the Federation Accounts Allocation Committee (FAAC) to the Federal, State, and Local Governments experienced a remarkable increase of 43%, reflecting a substantial rise in government revenue, as stated in a recent publication.

The Acting Director of Communication & Stakeholders Management at the Nigerian Extractive Industry Transparency Initiative (NEITI), Obiageli Onuorah, referenced the recently published FAAC Quarterly Review during an announcement in Abuja on Tuesday.

She reported that the committee allocated ₦15.26 trillion to the three tiers of government for the period in question.

Onuorah emphasized that this amount marks a record high in revenue distribution, representing a 43% increase compared to prior years.

The Quarterly Review attributed this revenue surge to the ongoing fiscal reform policies implemented by the Federal Government, particularly the elimination of fuel subsidies and adjustments to foreign exchange rates, which have positively influenced oil revenue remittances.

During the report’s announcement in Abuja, Dr. Orji Ogbonnaya Orji, Executive Secretary of NEITI, highlighted that the analyses were conducted in light of significant fiscal reforms that have transformed the revenue landscape. He specifically noted the effects of subsidy removal in mid-2023 on both national and subnational finances, as well as the impact of debt repayment deductions on state allocations.

Dr. Orji stated that the report aims to evaluate the sustainability of borrowing by federal and state governments to finance their projects and programs, along with the implications of reliance on natural resources, especially for states receiving the 13% derivation revenue from oil, gas, and solid minerals.

He added, “The analysis focused on crude oil revenue derivation states, as solid minerals continue to underperform despite their significant potentials.”

NEITI provided a detailed account of disbursements, which included: Federal Government: ₦4.95 trillion; State Governments: ₦5.81 trillion; and Local Governments: ₦3.77 trillion. It emphasized that the total FAAC disbursements, inclusive of Derivation Revenue, amounted to ₦15.26 trillion.

The NEITI FAAC Quarterly Review indicated that the distribution to state governments in 2024 experienced the most significant percentage increase of 62%, rising from ₦3.58 trillion in 2023. Local government councils followed with a 47% increase, while the Federal Government’s allocation grew by 24%, from ₦3.99 trillion in 2023 to ₦4.95 trillion in 2024.

The report underscores that total FAAC allocations surged by 66.2%, increasing from ₦9.18 trillion in 2022 to N10.9 trillion in 2023, and reaching N15.26 trillion in 2024, with the most substantial growth occurring between 2023 and 2024.

Drivers of Revenue Growth and Economic Risks:

The Quarterly Review attributes the ongoing increase in revenue disbursements to the government’s fiscal reforms, particularly the elimination of fuel subsidies and adjustments in exchange rates, which enhanced naira-denominated mineral revenue by over 400%.

While NEITI supports these reforms and will continue to provide reliable information and data, the Review urged the implementation of adequate measures to address and mitigate the economic and social risks associated with reforms in transitional economies such as Nigeria.

The agency identified potential risks, including inflationary pressures, a possible rise in debt servicing costs, and fiscal uncertainties for states reliant on oil revenues.

NEITI recommended that governments at all levels adopt innovative strategies to alleviate the effects of these economic challenges.

State-by-State Allocation Analysis:

The report also revealed that Lagos State received the highest allocation of ₦531.1 billion in 2024, followed by Delta (₦450.4 billion) and Rivers (₦349.9 billion). Conversely, Nasarawa State received the least allocation of ₦108.3 billion, followed by Ebonyi (₦110 billion) and Ekiti (₦111.9 billion).

Additionally, six states—Lagos, Rivers, Bayelsa, Akwa Ibom, Delta, and Kano—each received allocations exceeding ₦200 billion, which together constituted 33% of the total distributions to all states. In contrast, the six states with the lowest allocations—Yobe, Gombe, Kwara, Ekiti, Ebonyi, and Nasarawa—accounted for a mere 11.5%.

The report underscored a significant financial disparity, as the top four states—Lagos, Delta, Rivers, and Akwa Ibom—received a combined total of ₦1.49 trillion, which is more than three times the total of ₦442.4 billion received by the bottom four states—Kwara, Ekiti, Ebonyi, and Nasarawa.

Furthermore, the analysis indicated that total deductions for states’ foreign debts and other contractual obligations reached ₦800 billion, which represents 12.3% of the total allocations to the 36 states, including derivation revenue.

Lagos State experienced the highest debt deduction at ₦164.7 billion, making up over 20% of the total deductions. Following Lagos, Kaduna State had a deduction of ₦51.2 billion, while Rivers and Bauchi recorded significant deductions of ₦38.6 billion and ₦37.2 billion, respectively.

The report also pointed out that numerous states with elevated debt ratios were positioned in the lower tier of the FAAC allocation rankings, yet they ranked higher in terms of debt deductions. This situation raises concerns regarding their debt-to-revenue ratios and overall fiscal stability.