Key points
- Nigeria generated N3.4 trillion in gross revenue for May 2026, but only N2.3 trillion was distributed through FAAC.
- Economic analyst Dele Oye says N1.1 trillion, representing 32 per cent of total revenue, was deducted at source before allocation.
- Concerns have been raised over fiscal centralisation, weak subnational finances, declining VAT receipts and inadequate savings buffers.
Main story
The Chairman of the Alliance for Economic Research and Ethics Ltd/GTE, Dele Oye, has criticised the Federal Government over what he described as substantial deductions from Federation Account revenues before statutory allocations were made to states and local government councils.
Speaking on the outcome of the Federation Account Allocation Committee (FAAC) meeting for May 2026, concluded in June, Oye disclosed that Nigeria recorded gross revenue of N3.4 trillion during the period, representing a 6.9 per cent increase compared to April 2026.
However, he noted that only N2.3 trillion, equivalent to 68 per cent of the total revenue generated, was eventually shared among the Federal Government, state governments and local government councils.
According to him, the remaining N1.1 trillion, representing 32 per cent of gross revenue, was deducted at source through intervention funds and other statutory charges before distribution.
Oye argued that the scale of the deductions reflects a growing trend of fiscal centralisation that limits the financial capacity of subnational governments and undermines the principles of fiscal federalism.
Under the final allocation for the month, the Federal Government received N818.68 billion, representing 35.4 per cent of distributable revenue. State governments received N759.14 billion or 33 per cent, while the 774 local government councils shared N534.28 billion, amounting to 23.2 per cent. Oil-producing states also received N188.13 billion as 13 per cent derivation revenue.
The issues
Oye said the FAAC figures reveal deeper structural concerns within Nigeria’s public finance framework despite the increase in overall revenue generation.
According to him, intervention funds constituted the largest component of the deductions, with the N500 billion National Security Emergency Fund accounting for a significant portion.
He noted that the security allocation alone was almost equivalent to the total amount received collectively by all local government councils during the month, underscoring the fiscal burden imposed by insecurity.
The economist further expressed concern over weaknesses in key revenue streams. He stated that mineral revenue fell 51 per cent below budget expectations, while Value Added Tax (VAT) collections declined by eight per cent.
He warned that the drop in VAT revenue could indicate weakening consumer spending and reduced household purchasing power amid persistent inflationary pressures.
Another concern raised was the federation’s low savings level. According to the analysis, only N50 billion, representing 1.5 per cent of gross revenue, was saved during the period, a figure Oye described as insufficient to cushion the economy against future shocks.
What’s being said
Oye maintained that the Federal Government’s influence over national revenues extends beyond its direct allocation from FAAC.
“The Federal Government’s direct allocation of 35.4 per cent represents only part of its fiscal command. When combined with its administrative control over the N1.1 trillion in deductions, particularly the substantial intervention funds, the central government effectively manages a significantly larger share of the nation’s gross revenue.”
He added that while total deductions declined by seven per cent compared to April 2026, their overall size remains significant and continues to affect the fiscal autonomy of states and local governments.
The Alliance for Economic Research and Ethics also called for greater transparency in the administration of intervention funds and a review of Nigeria’s revenue-sharing arrangement.
What’s next
The Alliance is advocating several reforms aimed at strengthening fiscal sustainability and improving the financial position of subnational governments.
These include:
Introducing a cap on pre-distribution deductions from Federation Account revenues.
Enhancing transparency and accountability in the management of intervention funds.
Reviewing the existing revenue allocation formula to improve the fiscal capacity of states and local government councils.
Strengthening national savings mechanisms to provide buffers against economic downturns and revenue shocks.
Bottom line
While Nigeria recorded higher revenue generation in May 2026, concerns persist over the growing volume of deductions made before FAAC allocations are shared. Analysts argue that the practice concentrates fiscal control at the centre, limits the financial flexibility of states and local governments, and exposes broader weaknesses in revenue generation, savings culture and fiscal federalism. The debate is likely to intensify as calls grow for greater transparency and reforms to Nigeria’s revenue-sharing framework.
