Chairman, Alliance for Economic Research and Ethics Ltd/GTE, Dele Oye, has condemned the federal government’s handling of the May 2026 Federation Account Allocation Committee (FAAC) disbursement, alleging 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 stated that while the total federation revenue stood at N3.40 trillion, only N2.3 trillion was shared to the three tiers of government. He said the balance of N1.1 trillion, which accounted for 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.
He said the vertical allocation of the N2.3 trillion distributable revenue “highlights structural imbalances in Nigeria’s fiscal federalism,” adding that “the distribution formula continues to heavily favour the centre even before considering federal control over pre-distribution deductions.”
Oye said the biggest chunk of deductions came from intervention funds, especially the N500 billion National Security Emergency Fund, which he said was a reflection of the growing fiscal burden of insecurity on national resources. He added that the security allocation alone was almost what all the 774 local government areas got together from the federation account.
The report also showed that the Federal Government got N818.68 billion (35.4%), states received N759.14 billion (33%) and local governments got N534.28 billion (23.2%) under the final allocation structure, while oil-producing states received N188.13 billion as derivation.
Despite a 6.9% month-on-month rise in revenue, Oye warned that Nigeria’s fiscal position is still fragile, pointing to major budget shortfalls across key revenue lines, including a 51% shortfall in mineral revenue and declining Value Added Tax (VAT) collections.
The 8% drop 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 slammed 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 considered 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 enhance the fiscal capacity of subnational governments.
He said, “The Federation Account Allocation Committee (FAAC) disbursement for May 2026, concluded in June 2026, presents a mixed fiscal picture of nominal revenue growth and considerable structural vulnerabilities.
Gross revenue stood at N3.40 trillion, up 6.9% on a month-on-month basis from April 2026.
“Out of the gross revenue, only N2.3 trillion (68%) was shared by the three tiers of government while N1.1 trillion (32%) was deducted at the source.
“This 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 component 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, particularly the large intervention funds.
He added that “Total deductions stood at M1.10 trillion, representing 32% of gross revenue. “While this is a 7% decrease compared to April 2026, the absolute magnitude remains structurally important.”
On recommendations, Oye said the May 2026 FAAC disbursement points to the urgent need for comprehensive fiscal reform as the current trajectory is fiscally unsustainable and undermines equitable federalism principles.
The federal government must institutionalise a cap on pre-distribution deductions as a percentage of gross revenue, he said. Opaque intervention funds should be converted into ordinary budget allocations under the oversight of the National Assembly.
“The vertical allocation formula needs structural revision to improve subnational fiscal viability. A bigger share for States and Local Governments would better match resources with constitutional responsibilities.
“The federation should, by law, require a minimum savings threshold (e.g. 5-10% of gross revenue) into the Sovereign Wealth Fund before distribution.
“The large shortfalls suggest systemic flaws in budget revenue forecasting. “More conservative, data-driven revenue projections are essential.”
“The May 2026 FAAC disbursement data paints a picture of a federation wrestling with difficult fiscal dynamics,” Oye added. The nominal revenue growth of 6.9% is a positive sign, but the underlying structural issues, high deduction rates, large budget holes, and low level of savings require 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. “Sustainable fiscal federalism requires transparent, equitable and accountable management of the nation’s financial resources.”