FG Allegedly Cornered 32% Of May FAAC Revenue — Oye Claims

Chairman, Alliance for Economic Research and Ethics Ltd/GTE, Dele Oye, has condemned the manner in which the federal government handled the May 2026 Federation Account Allocation Committee (FAAC) disbursement, charging that a significant part of federation revenue was withheld before disbursement to states and local government councils.

Reacting to the May 2026 FAAC allocation figures released in June, Oye said that, while the total federation revenue was N3.40 trillion, only N2.3 trillion was shared to the three tiers of government. He said that the balance of N1.1 trillion representing about 32 per cent of the gross revenue, was deducted at source through various statutory and administrative charges before the allocation was shared among the federal government, states and local government areas.

The vertical allocation of the N2.3 trillion distributable revenue, according to him, “highlights structural imbalances in Nigeria’s fiscal federalism.” He added that “the distribution formula continues to heavily favour the centre even before accounting for federal control over pre-distribution deductions.
Oye said the biggest slice of deductions was from intervention funds, particularly the N500 billion National Security Emergency Fund, which he said showed the increasing fiscal pressure of insecurity on the nation’s resources. He said the security allocation alone was almost what all the 774 local government areas got together from the federation account.

The report also indicated that the Federal Government received N818.68 billion (35.4%), states N759.14 billion (33%) and local governments N534.28 billion (23.2%) under the final allocation structure, while oil-producing states were allocated N188.13 billion as derivation.

Revenue climbed 6.9 percent month-on-month, but Oye warned that Nigeria’s fiscal position remains fragile, citing large budget shortfalls in key revenue lines, including a 51 percent gap in mineral revenue and falling Value Added Tax (VAT) collections.

The 8% fall in VAT receipts was of particular concern and reflected a weakening in consumer demand and household purchasing power in the face of continuing inflationary pressures, he said.

The report also knocked the federation’s low savings culture, saying only N50 billion or 1.5 percent of gross revenue was saved during the period, a level it deemed insufficient to build buffers against future economic shocks.

The Alliance for Economic Research and Ethics LTD/GTE called for urgent reforms including tighter limits on pre-distribution deductions, greater transparency in intervention spending and a review of the revenue-sharing formula to increase the fiscal capacity of subnational governments.

He said, “The Federation Account Allocation Committee (FAAC) disbursement for May 2026, which ended in June 2026, shows a mixed fiscal picture of nominal revenue growth and serious structural vulnerabilities.

The gross revenue was N3.40 trillion, representing a month-on-month growth of 6.9% from April 2026.
“Out of the gross revenue, N2.3 trillion (68%) was shared by the three tiers of government while N1.1 trillion (32%) was deducted at source.

“The high rate of deduction is driven largely by intervention funds and effectively re-aligns fiscal resources and constrains the fiscal capacity of subnational governments.

Oye noted that “the direct federal government’s share of 35.4% is just one part of its fiscal power. “The central government effectively controls a substantially larger share of the nation’s gross revenue when combined with its administrative control over the N1.1 trillion in deductions, especially the large intervention funds.

He added that “Total deductions were M1.10 trillion, which is 32% of the gross revenue. “That is a 7% decrease compared to April 2026, but the absolute size remains structurally significant.”

On recommendations, Oye said the May 2026 FAAC disbursement points to the urgency of comprehensive fiscal reforms as the current trajectory is fiscally unsustainable and undermines the principles of equitable federalism.

He said the federal government must institutionalise a cap on pre-distribution deductions as a percentage of gross revenue. Opaque intervention funds should be transformed into regular budget allocations under the supervision of the National Assembly.

“The formula for vertical allocation needs structural revision to improve the fiscal viability of subnational governments. A larger share for States and Local Governments would better align resources with constitutional responsibilities.

The federation should mandate by law a minimum savings threshold (e.g. 5-10% of gross revenue) into the Sovereign Wealth Fund prior to distribution.

“The large shortfalls are indicative of systemic flaws in budget revenue forecasting. “Data-driven revenue projections need to be more conservative.”

“The May 2026 FAAC disbursement data paints a picture of a federation wrestling with difficult fiscal dynamics,” Oye said. While the nominal revenue growth of 6.9% is a positive sign, the underlying structural issues, high deduction rates, large budget holes and low level of savings need immediate policy attention.

“Fiscal resources are concentrated at the center and the opacity of intervention funds undermines the federalist principles on which Nigeria’s fiscal architecture is built. “Transparent, equitable and accountable management of the nation’s financial resources is necessary for sustainable fiscal federalism.”