Onome Amuge

Nigeria’s federal, state, and local governments shared a total of N2.001 trillion in July, according to figures released by the Federation Account Allocation Committee (FAAC), underscoring both the scale of public spending needs and the fiscal pressures from fluctuating oil receipts and weak non-oil revenues.

At its August meeting chaired by Wale Edun, minister of finance and coordinating minister of the economy, FAAC said the disbursement came from a gross inflow of N3.836 trillion. The federal government received N735.1 billion, the 36 states were allocated N660.3 billion, and local government councils collected N485 billion. Oil-producing states received an additional N120.4 billion as their 13 per cent derivation entitlement from mineral revenues.

The allocations, comprising statutory revenues, value added tax (VAT), electronic money transfer levy (EMTL) proceeds, and exchange rate adjustments, are considered a critical source of fiscal liquidity for Nigeria’s three tiers of government, which rely heavily on federally shared revenues to finance wages, infrastructure, and social spending.

The headline allocation came despite a sharp drop in statutory revenues. Gross statutory revenue of N3.07 trillion was down N415 billion from June’s N3.49 trillion, reflecting volatile oil receipts and weaker corporate tax collections. Company Income Tax (CIT) and levies on imports recorded notable declines, offset partially by stronger inflows from petroleum profit tax, excise duty, EMTL, and oil and gas royalties.

From statutory inflows, after deducting N123.6 billion for collection costs and N1.66 trillion for transfers, interventions, and refunds, just N1.28 trillion remained for distribution. The federal government took N613.8 billion, states N311.3 billion, local councils N240 billion, and oil-producing states N117.7 billion.

Value Added Tax remained a stable source of inflows. Gross VAT revenue for July stood at N687.9 billion, up slightly from June. After deductions, N640.6 billion was shared, with N96.1 billion to the centre, N320.3 billion to states, and N224.2 billion to councils.

Revenues from the Electronic Money Transfer Levy totalled N39.2 billion, with the bulk distributed to states and local governments. A further N39.7 billion was attributed to exchange difference gains, reflecting Nigeria’s ongoing currency realignments.

Minister Edun commended the FAAC committee for what he described as diligent efforts in allocating resources efficiently. He argued that recent government reforms including fuel subsidy removal, exchange rate liberalisation, and efforts to widen the tax net, were beginning to show results.

“Better days are ahead,” Edun told members, while urging that all tiers of government adopt prudent management of public resources to ensure Nigeria’s wealth is effectively channelled to citizens.

Dependence on shared revenues

For most Nigerian states, federal allocations make up between 60 and 80 per cent of their budgets. Lower statutory inflows threaten to squeeze spending capacity, particularly in states with weak internally generated revenue. Rising wage bills, arrears to contractors, and the cost of new infrastructure projects mean many states face persistent cash flow stress.

The July data also underscored Nigeria’s continued reliance on portfolio-sensitive flows and temporary revenue streams rather than deeper fiscal reforms. While VAT has become an important stabiliser, its collection base remains narrow, with compliance low across the informal sector.

The FAAC allocation comes at a time when food inflation remains above 22 per cent, foreign investment in the productive sectors continues to slide, and the manufacturing sector is struggling with elevated costs. Economists warn that without more robust revenue diversification including strengthening non-oil exports and broadening the tax base, allocations will remain hostage to swings in oil and exchange earnings.

Still, Edun struck an optimistic tone, arguing that reforms were laying the foundation for long-term fiscal resilience. “Our collective efforts will continue to drive growth and development,” he said, calling on federal, state, and local governments alike to channel the July windfall into investments that meet the needs of citizens.