Chairman of the Alliance for Economic Research and Ethics Ltd/GTE, Dele Oye, has criticised the federal government’s handling of the May 2026 Federation Account Allocation Committee (FAAC) disbursement, alleging that a significant portion of federation revenue was withheld before being shared among the three tiers of government.
Reacting to the latest FAAC figures released in June 2026, Oye said total federation revenue stood at N3.40 trillion, but only N2.3 trillion was distributed to the federal, state, and local governments, while N1.1 trillion was deducted at source through statutory and administrative charges.
He described the deductions—representing about 32 per cent of gross revenue—as a major structural concern in Nigeria’s fiscal federalism, arguing that the system continues to favour centralised control of national resources even before official revenue sharing takes place.
According to him, intervention funds accounted for the largest portion of deductions, including a N500 billion allocation to the National Security Emergency Fund, which he said reflects rising fiscal pressure linked to insecurity.
Oye noted that the security-related deduction alone was nearly equivalent to the total allocation received by all 774 local government councils combined during the same period.
Under the final FAAC structure, the Federal Government received N818.68 billion (35.4%), states received N759.14 billion (33%), while local governments got N534.28 billion (23.2%). Oil-producing states received an additional N188.13 billion as derivation.
Despite a reported 6.9 per cent month-on-month increase in gross revenue, Oye warned that Nigeria’s fiscal position remains fragile due to significant shortfalls in key revenue streams.
He highlighted a 51 per cent underperformance in mineral revenue and an 8 per cent decline in Value Added Tax (VAT) collections, describing the VAT drop as a worrying signal of weakening consumer demand amid inflationary pressure.
Oye also criticised the country’s low savings culture, noting that only N50 billion—about 1.5 per cent of gross revenue—was saved during the period, a level he described as inadequate to cushion future economic shocks.
The analyst called for urgent reforms to Nigeria’s revenue-sharing framework, including stricter limits on pre-distribution deductions and greater transparency in the management of intervention funds.
He further recommended a review of the vertical allocation formula to strengthen the fiscal capacity of states and local governments, which he said remain under-resourced relative to their constitutional responsibilities.
Oye also proposed the introduction of a mandatory savings threshold of 5–10 per cent of gross revenue into the Sovereign Wealth Fund before FAAC distributions are made.
He warned that continued reliance on high deductions and centralised control of funds could undermine fiscal federalism and weaken subnational governments’ ability to deliver public services.
“The federation is navigating complex fiscal dynamics. While nominal revenue growth suggests positive momentum, structural issues such as high deductions, weak savings, and revenue shortfalls require urgent policy attention,” he said.
Oye concluded that sustainable fiscal management would require more transparent, equitable, and accountable allocation of national resources to ensure long-term economic stability.
