FAAC shares N2.34trn as statutory revenue drops N1.51trn

The Federation Account Allocation Committee (FAAC) distributed the funds at its September meeting, with the Federal Government receiving N804.90 billion, states N794.31 billion and the 774 local government councils N555.14 billion. Oil-producing states also received N184.39 billion as their 13 per cent derivation from mineral revenues.

When the derivation allocation is included, state and local governments collectively received about N1.53 trillion, or roughly 66 per cent of the total distributable revenue, leaving the Federal Government with about N805 billion.

The size of the allocation underscores the growing importance of FAAC revenues to subnational governments, many of which depend heavily on monthly federation transfers to fund salaries, infrastructure, social services and other recurrent obligations.

But behind the headline N2.34 trillion allocation is a significant deterioration in statutory revenue.

Gross statutory revenue fell to N2.85 trillion in August from N4.36 trillion in July, a decline of about N1.51 trillion or 35 per cent in a single month.

The decline was partly offset by stronger VAT collections. Gross VAT revenue increased to N834.84 billion from N793.97 billion in July, representing an increase of N40.88 billion.

The contrasting movements are economically significant. While VAT growth points to stronger collections from consumption and business transactions, the fall in statutory revenue highlights the volatility of other major federation revenue streams, particularly those linked to the petroleum and mineral sectors.

FAAC said Petroleum Profit Tax, Hydrocarbon Tax, VAT, Customs and Excise Duties recorded increases during the month, but these were outweighed by declines in Companies Income Tax, Capital Gains Tax, Stamp Duty, Petroleum Royalties, Mineral Royalties, Gas Flared Penalty, Import Duty, Rental Gas Flared Fees and Miscellaneous Oil Revenue.

From the N1.565 trillion distributable statutory revenue, the Federal Government received N727.57 billion, states N369.04 billion and local governments N284.51 billion, while N184.39 billion went to benefiting states as derivation.

The N773.23 billion distributable VAT pool was shared, with N77.32 billion going to the Federal Government, N425.28 billion to states and N270.63 billion to local governments.

The gap between gross revenue and the amount eventually shared is also substantial. August gross federation revenue stood at N3.685 trillion, but N125.14 billion was allocated for cost of collection while another N1.221 trillion went to transfers, refunds and savings before the distributable balance was determined.

This means the three tiers received about N2.34 trillion from a gross revenue pool of N3.69 trillion, underscoring the importance of understanding the quality and composition of federation revenue rather than focusing solely on the headline allocation.

For state and local governments, the August distribution provides considerable fiscal support, but the sharp volatility in statutory receipts underscores the difficulty of relying on monthly FAAC inflows for long-term spending commitments.

The rising VAT contribution also points to the growing importance of domestic economic activity to government revenue. Sustaining that revenue stream will depend on stronger formal-sector activity, business growth and household consumption, while more stable oil and mineral earnings remain critical to the statutory pool.

The August figures therefore leave governments with substantial cash to deploy, but also expose the fragility of Nigeria’s revenue structure: a sizeable FAAC allocation can coexist with a sharp fall in statutory earnings, making stronger internally generated revenue, broader taxation and more predictable non-oil income increasingly important to fiscal sustainability.