The Federation Accounts Allocation Committee (FAAC) disbursed a total of N15.26 trillion to the Federal, State, and Local Governments in 2024, marking a 43% increase compared to previous years.
NEITI Highlights Record Revenue Growth
Acting Director of Communication & Stakeholders Management at the Nigeria Extractive Industry Transparency Initiative (NEITI), Obiageli Onuorah, revealed this in Abuja on Tuesday, March 19, citing findings from the latest FAAC Quarterly Review.
According to Onuorah, the surge in government revenue is attributed to key fiscal policy reforms, particularly the removal of fuel subsidies and foreign exchange rate adjustments, which significantly boosted oil revenue remittances.
Announcing the report, Dr. Orji Ogbonnaya Orji, Executive Secretary of NEITI, explained that the review was conducted against the backdrop of major economic shifts, including subsidy removal in mid-2023 and its impact on national and subnational finances.
“The objective of the report is to assess the sustainability of borrowing by federal and state governments and the implications of natural resource dependence,” Orji stated.
He noted that special attention was given to states benefiting from the 13% derivation revenue from oil, gas, and solid minerals.
Breakdown of FAAC Disbursements in 2024
NEITI provided the following breakdown of the N15.26 trillion FAAC disbursement:
- Federal Government: N4.95 trillion
- State Governments: N5.81 trillion
- Local Governments: N3.77 trillion
State governments saw the largest percentage increase in allocations, rising 62% from N3.58 trillion in 2023, followed by local governments with a 47% increase, while the federal government’s share grew 24% from N3.99 trillion in 2023.
Overall, FAAC allocations jumped 66.2% over two years, from N9.18 trillion in 2022 to N10.9 trillion in 2023, before reaching N15.26 trillion in 2024.
Key Drivers of Revenue Growth
The Quarterly Review attributed the increase in revenue disbursements to:
- Fuel subsidy removal, which freed up significant government funds.
- Exchange rate adjustments, leading to a 400% increase in naira-denominated mineral revenue.
- Higher oil revenue remittances, benefiting states dependent on natural resource revenue.
However, while these reforms boosted revenue, NEITI cautioned that they also introduced economic risks that require careful management.
Economic Challenges and Debt Risks
Despite revenue growth, NEITI warned about potential risks, including:
- Inflationary pressures
- Rising debt servicing costs
- Fiscal uncertainty for oil-dependent states
The report urged all levels of government to adopt innovative financial strategies to mitigate these risks and ensure sustainable economic growth.
State-by-State Allocation Analysis
The report revealed that Lagos State received the highest FAAC allocation in 2024 at N531.1 billion, followed by:
- Delta State: N450.4 billion
- Rivers State: N349.9 billion
Conversely, the states with the lowest allocations were:
- Nasarawa State: N108.3 billion
- Ebonyi State: N110 billion
- Ekiti State: N111.9 billion
Additionally, six states—Lagos, Rivers, Bayelsa, Akwa Ibom, Delta, and Kano—each received over N200 billion, collectively accounting for 33% of total state allocations. Meanwhile, the six lowest-receiving states—Yobe, Gombe, Kwara, Ekiti, Ebonyi, and Nasarawa—accounted for only 11.5%.
The report also highlighted a major financial divide: the top four states (Lagos, Delta, Rivers, and Akwa Ibom) received N1.49 trillion, which is more than three times the combined total of the bottom four states (Kwara, Ekiti, Ebonyi, and Nasarawa), which received N442.4 billion.
Debt Deductions and Fiscal Health
The review further disclosed that total debt deductions for state foreign debts and contractual obligations amounted to N800 billion, representing 12.3% of total FAAC allocations.
- Lagos State had the highest debt deduction at N164.7 billion, accounting for over 20% of total deductions.
- Kaduna State followed with N51.2 billion, while Rivers (N38.6 billion) and Bauchi (N37.2 billion) also faced significant deductions.
Notably, several highly indebted states ranked lower in FAAC allocations but higher in debt deductions, raising concerns about their debt-to-revenue ratios and overall fiscal sustainability.
Conclusion
While the record-breaking FAAC disbursements in 2024 highlight the success of fiscal reforms, NEITI has urged the government to ensure that revenue gains translate into sustainable economic growth.
The report underscores the urgent need for strategic financial management to address debt burdens, economic uncertainties, and fiscal risks, especially for states heavily reliant on oil revenue.