FG Allegedly Withholds ₦1.1 Trillion Before FAAC Sharing

The Chairman of the Alliance for Economic Research and Ethics Ltd/GTE, Dele Oye, has accused the Federal Government of taking a significant portion of Federation Account revenue before distributing funds to states and local governments.

‎Oye said the deductions made at source have continued to reduce the financial strength of subnational governments and weaken Nigeria’s fiscal federalism.
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‎Naija News reports that he spoke while reacting to the Federation Account Allocation Committee (FAAC) disbursement for May 2026, which was concluded in June.
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‎According to Oye, Nigeria generated a gross revenue of ₦3.4 trillion during the period, representing a 6.9 per cent increase compared to April 2026.
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‎However, he said only ₦2.3 trillion was eventually distributed among the Federal Government, states and local governments, while ₦1.1 trillion was deducted before the sharing process.

He described the deductions as a major concern, saying they amounted to 32 per cent of the total revenue generated.
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‎“FAAC disbursement for May 2026, concluded in June 2026, reveals a complex fiscal picture characterised by nominal revenue growth juxtaposed with significant structural vulnerabilities.
‎“Gross revenue reached N3.4tn, a 6.9 per cent month-on-month increase from April 2026.

‎“Of the gross revenue, only ₦2.3tn (68 per cent) was distributed among the three tiers of government, while ₦1.1tn (32 per cent) was deducted at the source. This high deduction rate, driven primarily by intervention funds, effectively recentralises fiscal resources and constrains subnational fiscal capacity,” Oye said.
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‎Oye argued that the pattern of revenue distribution showed deep-rooted challenges in Nigeria’s fiscal structure.
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‎He said the current arrangement continues to give the Federal Government greater financial influence even before the deductions are considered.
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‎Under the final allocation, the Federal Government received N818.68bn, representing 35.4 per cent of the distributable revenue.
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‎States received N759.14bn, accounting for 33 per cent, while local governments got N534.28bn, representing 23.2 per cent.
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‎Oil-producing states also received N188.13bn as derivation revenue.
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‎Oye said the Federal Government’s influence goes beyond its official allocation.
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‎“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 N1.1tn in deductions, particularly the substantial intervention funds, the central government effectively manages a significantly larger share of the nation’s gross revenue,” he said.
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‎The Alliance chairman identified intervention funds as the major driver of the deductions, pointing specifically to the N500 billion National Security Emergency Fund.
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‎He said the amount reflected the growing financial burden of insecurity in the country.
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‎According to him, the fund was almost equal to the combined allocation received by Nigeria’s 774 local government areas during the period.
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‎Oye noted that while security funding remained important, the structure of deductions required more transparency to prevent further pressure on states and local councils.
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‎Despite the increase in gross revenue, Oye warned that Nigeria’s fiscal position remained fragile due to weaknesses in major revenue sources.
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‎He said mineral revenue performed 51 per cent below budget expectations, while Value Added Tax collections declined by eight per cent.
‎According to him, the fall in VAT revenue was a warning sign, as it suggested weaker consumer spending and declining household purchasing power amid inflation.

He also raised concerns about Nigeria’s savings capacity, noting that only N50bn, representing 1.5 per cent of gross revenue, was saved during the period.

‎Oye described the figure as inadequate to protect the economy against future shocks.
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‎“Total deductions amounted to N1.1tn, representing 32 per cent of gross revenue. While this marks a seven per cent decline compared to April 2026, the absolute magnitude remains structurally significant,” he added.

‎The Alliance for Economic Research and Ethics urged the Federal Government to introduce limits on deductions made before FAAC distribution.

The group also called for improved transparency in the management of intervention funds and a review of the revenue-sharing formula to strengthen the financial capacity of states and local governments.