The Federation Accounts Allocation Committee (FAAC) has announced a significant rise in revenue disbursements for 2024, which have increased by 43% compared to previous years. A total of N15.26 trillion was disbursed to the Federal, State, and Local Governments, marking a historic high in revenue distribution.
According to the Nigerian Extractive Industry Transparency Initiative (NEITI), this surge in revenue disbursements is largely attributed to fiscal reforms, particularly the removal of fuel subsidies and the implementation of foreign exchange rate adjustments. These policies have had a positive impact on oil revenue remittances.
NEITI’s Executive Secretary Orji Ogbonnaya Orji, highlighted that the report, based on major fiscal reforms, also assessed the sustainability of government borrowing and the dependency of state governments on natural resources. The review pointed out that while solid minerals hold significant potential, they are still underperforming in generating revenue.
Breakdown of Disbursements:
- Federal Government: N4.95 trillion
- State Governments: N5.81 trillion
- Local Governments: N3.77 trillion
The total FAAC disbursements (including derivation revenue) stood at N15.26 trillion. The review revealed that the largest percentage increase in disbursements was for state governments, which saw a 62% rise, followed by local governments with a 47% increase, and the Federal Government’s share rose by 24%.
Revenue Growth and Economic Risks: The sustained increase in revenue was largely due to the government’s fiscal reforms. However, the review also cautioned about potential economic risks, including inflationary pressures, rising debt servicing costs, and fiscal uncertainties for states that are heavily reliant on oil revenues.
NEITI recommended that governments at all levels take innovative actions to mitigate the impact of these economic challenges and ensure sustainable fiscal health.
State-by-State Allocation Analysis:
- Top recipients: Lagos State received the highest allocation of N531.1 billion, followed by Delta (N450.4 billion) and Rivers (N349.9 billion).
- Lowest recipients: Nasarawa State received the least allocation of N108.3 billion, followed by Ebonyi (N110 billion) and Ekiti (N111.9 billion).
The top six states—Lagos, Rivers, Bayelsa, Akwa Ibom, Delta, and Kano—received 33% of total state allocations, while the six states with the lowest allocations—Yobe, Gombe, Kwara, Ekiti, Ebonyi, and Nasarawa—accounted for just 11.5%. The financial divide between states is significant, with Lagos, Delta, Rivers, and Akwa Ibom receiving over three times more than the bottom four states.
Debt Deductions and Fiscal Health: The report also highlighted the impact of debt deductions, which amounted to N800 billion, representing 12.3% of total allocations to the states. Lagos had the highest debt deduction of N164.7 billion, followed by Kaduna State with N51.2 billion. The review raised concerns about the high debt ratios in some states, particularly those in the lower half of the FAAC allocation rankings.
This analysis underscores the need for careful fiscal management, especially in states heavily dependent on oil revenues, to ensure long-term financial stability.
