Sh*ck Claim: Federal Government 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 retaining a significant share of Federation Account revenues before distributing funds to states and local governments.....KINDLY READ THE FULL STORY HERE▶

He argued that such deductions at source continue to weaken the fiscal capacity of subnational governments and undermine the principles of fiscal federalism in Nigeria.

Oye made the remarks while reacting to the Federation Account Allocation Committee (FAAC) disbursement for May 2026, which was finalised in June.

According to him, Nigeria recorded a gross revenue of ₦3.4 trillion during the period, reflecting a 6.9 per cent increase compared to April 2026. However, only ₦2.3 trillion was shared among the three tiers of government, while ₦1.1 trillion was deducted before distribution.

He described the deductions—about 32 per cent of total revenue—as a major structural concern.

“FAAC disbursement for May 2026 shows a mixed fiscal picture, with revenue growth alongside persistent structural weaknesses. Gross revenue stood at ₦3.4tn, a 6.9 per cent increase from April 2026,” he said.

“Of this, ₦2.3tn (68 per cent) was distributed, while ₦1.1tn (32 per cent) was deducted at source. These deductions, largely driven by intervention funds, effectively recentralise fiscal resources and limit the capacity of subnational governments,” he added.

Oye further argued that the current revenue structure gives the Federal Government substantial financial control even before official allocations are made.

Under the disbursement breakdown, the Federal Government received ₦818.68bn (35.4 per cent), states got ₦759.14bn (33 per cent), while local governments received ₦534.28bn (23.2 per cent). Oil-producing states also got ₦188.13bn as derivation revenue.

He noted that the Federal Government’s fiscal influence extends beyond its statutory allocation due to its control over deductions.

“The Federal Government’s 35.4 per cent allocation only reflects part of its fiscal reach. When combined with its oversight of ₦1.1tn in deductions—especially intervention funds—it effectively controls a much larger share of national revenue,” he said.

Oye identified intervention funds as the main driver of deductions, highlighting the N500bn National Security Emergency Fund as a major component.

He said the allocation underscores the rising financial burden of insecurity in the country, noting that the security fund alone is nearly equivalent to the combined allocations of all 774 local government areas.

While acknowledging the importance of security spending, he stressed the need for greater transparency and accountability in how such funds are managed.

Despite the increase in overall revenue, Oye warned that Nigeria’s fiscal outlook remains fragile due to underperformance in key revenue streams.

He stated that mineral revenues fell 51 per cent below budget expectations, while Value Added Tax (VAT) declined by eight per cent, signalling reduced consumer spending and weakening purchasing power amid inflation.

He also expressed concern over Nigeria’s low savings rate, noting that only ₦50bn—about 1.5 per cent of total revenue—was saved during the period.

He described the figure as insufficient to provide economic buffers against future shocks.

“Total deductions amounted to ₦1.1tn, representing 32 per cent of gross revenue. Although this reflects a slight decline compared to April 2026, the overall level remains structurally significant,” he added.

The Alliance for Economic Research and Ethics called on the Federal Government to set limits on pre-FAAC deductions, improve transparency in intervention fund management, and review the revenue-sharing formula to strengthen fiscal capacity at the subnational level.