FAAC allocation rises 43% to record N15.26trn in 2024

Onome Amuge

The Federation Accounts Allocation Committee (FAAC) set a new benchmark for revenue distribution in 2024, disbursing a total of N15.26 trillion to the federal, state, and local governments.

The figure stands as the highest revenue allocation figure in the history of Nigeria, representing a 43 percent increase compared to previous years, as highlighted by the Nigeria Extractive Industries Transparency Initiative (NEITI ) FAAC Quarterly Review. 

NEITI attributed the notable increase in revenue disbursements to a series of fiscal reform measures enacted by the federal government, particularly the removal of fuel subsidies and the introduction of more flexible foreign exchange policies.

Orji Ogbonnaya Orji, the executive secretary of the Nigerian Extractive Industries Transparency Initiative , revealed on Tuesday during a press briefing in Abuja, that Lagos State emerged as the top beneficiary of FAAC, receiving an unprecedented allocation of N531.1 billion. Delta State secured the second-highest allocation of N450.4 billion, with Rivers State  following behind at N349.9 billion.

Meanwhile, the distribution reveals a wide disparity in revenue disbursements across the country, with Nasarawa State receiving the lowest allocation of N108.3 billion, followed by Ebonyi (N110 billion) and Ekiti (N111.9 billion).

The gap in revenue distribution was also evident in the fact that six states—Lagos, Rivers, Bayelsa, Akwa Ibom, Delta, and Kano—were the biggest beneficiaries in the FAAC disbursements as they each received N200 billion, collectively accounting for 33 percent of the total allocations to all 36 states.

Meanwhile, the lowest-receiving states—Yobe, Gombe, Kwara, Ekiti, Ebonyi, and Nasarawa—made up only 11.5 percent of the total allocations received by all states.

Highlighting the critical factors that influenced the scope of the analysis, Orji pointed out that the impact of major fiscal reforms, such as the removal of fuel subsidies in mid-2023 and the implications of debt servicing deductions on state allocations, shaped the revenue landscape in Nigeria, both at the national and subnational levels.

The total disbursements made by FAAC during 2024 added up to N15.26 trillion, with the federal government receiving N4.95 trillion, state governments receiving N5.81 trillion, Local Governments receiving N3.77 trillion, and the remaining N0.73 trillion allocated as derivation revenue, as per the year-end review.

In terms of percentage increase, the NEITI FAAC Quarterly Review revealed that state governments saw the highest growth rate of 62 percent in their share of revenue disbursements, from N3.58 trillion in 2023 to N5.81 trillion in 2024. This was followed by local government councils, whose share grew by 47 percent, increasing from N2.55 trillion in 2023 to N3.77 trillion in 2024.

The NEITI FAAC Quarterly Review also revealed an increase in total FAAC allocations from N9.18 trillion in 2022 to N10.9 trillion in 2023, and 66.2 percent growth to N15.26 trillion in 2024.

The Quarterly Review attributed the consistent growth in revenue disbursements by the Nigerian government to strategic fiscal reforms, primarily the removal of fuel subsidies and adjustments in the exchange rate policy. These reforms, according to the report, resulted in a 400 percent increase in mineral revenue denominated in naira.

While NEITI expressed its approval and commitment to assisting the government’s reforms with reliable data and information, the quarterly review also emphasised the need for measures to manage and mitigate economic and social risks that could arise in transitional economies, such as Nigeria, during the implementation of these reforms.

NEITI flagged the risks of inflationary pressures, increased debt servicing costs, and fiscal uncertainties for oil-dependent states, and proposed that governments take innovative measures to alleviate these potential economic challenges.

The NEITI quarterly review unveiled a disparity in revenue disbursements among the states, with the four highest-earning states—Lagos, Delta, Rivers, and Akwa Ibom—collectively receiving N1.49 trillion, which was more than triple the combined total of the four lowest-earning states—Kwara, Ekiti, Ebonyi, and Nasarawa—which received N442.4 billion.

An analysis of the NEITI quarterly review revealed that a significant portion of the funds disbursed to the states, totaling N800 billion, or 12.3 percent of the total allocations including derivation revenue, was deducted to service foreign debts and fulfill contractual obligations, highlighting the burden of debt servicing on the states’ finances.

The report disclosed that Lagos State accounted for the largest portion of debt deductions of N164.7 billion, representing 20 percent of the total deductions across all states. Kaduna State followed closely behind with N51.2 billion, while Rivers State’s deductions stood at N38.6 billion and Bauchi State recorded deductions of N37.2 billion.

Despite receiving lower allocations from FAAC, several states with high debt ratios were found to have comparatively larger debt deductions, as revealed in the NEITI review, raising serious concerns about the debt-to-revenue ratios and overall fiscal health of these states.

 NEITI made several key recommendations in its report, emphasising the need for the government to sustain its policy reform initiatives to foster sustainable revenue growth and promote economic stability, with a particular focus on job creation, poverty reduction, and inflation control on essential goods and services.

In addition to this, NEITI advised the government to adopt a more prudent approach to crude oil production and pricing estimates in its budgeting process, to avoid revenue shortfalls and ensure a more realistic and sustainable fiscal planning.

NEITI also drew attention to the pressing need for the Nigerian government to re-evaluate its heavy dependence on minerals revenue.

Building on its analysis, the NEITI FAAC review highlighted the crucial role of stakeholders in holding governments accountable for the effective and transparent management of public resources, particularly revenue generated from the extractive industries.