…Urges Policy Action to Safeguard Fiscal Gains
The Nigerian Extractive Industries Transparency Initiative (NEITI) released its analysis of the Federation Account Allocation Committee – (FAAC) Allocation and Disbursements to the Federation, documenting a historic rise in Federation Account receipts and distributions, improved state debt metrics, and a set of policy priorities to protect fiscal stability heading into Q4 2025.
The Report which is contained in the Agency’s Quarterly Review for the Quarter 3 2025, showed record Total FAAC disbursements of N6.0 trillion to the federation. This figure includes 13 percent payments to derivative states. Year on year Quarterly FAAC allocations in 2025, grew by 55.6 percent compared with Quarter 3 of 2024, more than doubling allocations over a two-year period.
A breakdown of the disbursements showed that the federal government received N2.19 trillion, states received N1.97 trillion and local governments received N1.45 trillion.
The Review also showed that Statutory revenues accounted for 62 percent of shared receipts, while Value Added Tax-VAT- 34%, while Electronic Money Transfer Levy and augmentation from non-oil excess revenue each accounted for 2% respectively.
The distribution to the 36 states comprises of revenues from statutory sources, Value Added Tax-VAT, Electronic Money Transfer levy-EMTL and Ecological fund. States also received additional N100 Billion as augmentation from the non-oil excess revenue account.
Allocations to states showed that Lagos State recorded the highest revenue at N179.3 billion for the quarter, translating to an average monthly receipt of N59.76 billion. Kano came second with N79.2 billion while Rivers State came third with N78.8 billion. Nasarawa state received the lowest allocation of N42.5 billion followed by Ebonyi state with N42.9 billion and Ekiti – N43 billion. The data also showed an average monthly allocation of N14.1 billion to Nasarawa state, indicating that the range between the highest and lowest state allocations was N136.8 billion. Also, Lagos’ allocation of N179Billion is more than double the amount received by the second and third highest – grossing states -Kano and Rivers respectively.
From the Quarterly Review, nine oil producing states received N424 billion as 13 percent derivation revenue. This materially altered state rankings in the review, throwing up the derivative states as receiving nearly half of the gross allocations from FAAC. A closer look at the derivative disbursements showed the four oil bearing states – Akwa Ibom, Bayelsa, Delta and Rivers States in the stand-out region, with Delta state grossing the highest in revenue allocation of N180.68Billion.
NEITI also revealed that the deductions from states’ allocations to service debt and other obligations totalled N225.89 billion, which indicates a 6.5 percent decline from the previous quarter. The average debt service ratio across states was 9.4 percent with individual state ratios ranging from 1.5 percent to 26.8 percent. However, About one-third of the states have a debt service ratio of less than 5%, while more than two-thirds have a ratio of less than 10%. Ogun State, with a ratio of 26.8%, topped the chart, closely followed by Lagos (26.5%), and Cross River ranked third, the NEITI report disclosed.
On the outlook for Q4 2025, NEITI Quarterly Review noted that early Quarter 4 indicators show lower average oil prices and slightly higher exchange rates compared with Quarter 3 figures. 1.64 million barrels per day was recorded as average daily crude oil production in Q3 while 1.59 million barrels per day was recorded against the first month of Quarter 4. These developments, if sustained, could reduce foreign exchange denominated inflows and lead to lower distributable revenues in Q4 of 2025.
The NEITI report also disclosed that derivation revenue from the solid minerals sector was unavailable for distribution to Federation Account beneficiaries because it was negligible and insufficient for distribution. The last distribution of revenues from solid minerals occurred in August 2024.
The Executive Secretary of NEITI, Hon Musa Sarkin Adar, welcomed the strong remittance performance and the reduction in states’ debt burden, but drew attention to the volatility in oil markets and optimistic budget benchmarks which may pose risks to fiscal sustainability.
To protect gains and strengthen fiscal resilience, NEITI recommended the publication of up-to-date balances and liabilities for key federation accounts including the Non-oil Excess Account, Domestic Excess Crude Account, Stabilisation Fund, Ecology Fund, and other mineral resource-linked accounts. The publication should provide clear notes explaining FAAC transactions, refunds, net-offs and priority project entries in other to enhance transparency in the inflows, allocations and disbursements from the federation accounts.
The Review also pointed out the need to apply the Appropriation Act benchmarks consistently when determining monthly distributable revenues, use the Stabilisation Account to smoothen monthly disbursements, transfer exchange gains into stabilisation buffers.
NEITI urged government at all levels to ensure the growth of Nigeria’s sovereign wealth and stabilisation capacity, by committing to regular transfers to the Nigeria Sovereign Wealth Fund and other related stabilisation mechanisms in line with the fiscal responsibility frameworks.
The NEITI Quarterly Review further advised governments at all levels to adopt realistic budget benchmarks by setting a more conservative and achievable crude oil production and price assumptions in the budget to reduce implementation gaps, deficit and debt metrics. This is in addition to accelerating revenue diversification by prioritising reforms that would attract investments in to the mining sector, expedite legislation to modernize the Mineral and Mining Act, support reforms in the downstream petroleum sector as well as the full implementation of the Petroleum Industry Act to expand domestic refining and value addition.
It called on the Office of the Accountant General of the Federation, the Revenue Mobilisation Allocation and Fiscal Commission, FAAC, the National Economic Council, the National Assembly, and state governments to act on the recommendations in other to strengthen transparency, accountability, and long-term fiscal sustainability.
Though the Quarter 3 2025 FAAC results are encouraging, NEITI reiterates that the data presents opportunity to government to institutionalise prudent fiscal practices that will protect the gains that has been recorded so far in growing revenue and reduce vulnerability to commodity shocks.
“The Q3 2025 FAAC results are encouraging, but windfalls must be managed with discipline. Greater transparency, realistic budgeting, and stronger stabilization mechanisms will ensure these resources deliver durable benefits for all Nigerians,” said Hon. Musa Sarkin Adar.
Comment here