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Big money, small impact: Non-Performing Govs on fire over N9tn FAAC windfall
FAAC allocations to states surged by over N2tn in one year, according to an analysis of Federation Account disbursement data published by the National Bureau of Statistics highlighting the scale of the revenue windfall that flowed to subnational governments in 2025 amid higher federation inflows.
The sharp rise has triggered criticism from organised labour and opposition political parties, with the Nigeria Labour Congress warning that higher allocations have failed to deliver meaningful improvements in citizens’ welfare due to weak governance, misplaced priorities, and corruption at the state level.
Civil society organisations have also faulted state governments, accusing them of mismanaging the inflows and failing to translate increased revenues into visible development outcomes, while calling for stronger accountability and oversight.
Economists, meanwhile, say the surge has expanded states’ fiscal space but caution that heavy dependence on federally shared revenue and poor revenue management continue to undermine sustainable development at the subnational level.
The Federation Account disbursement data show that state governments received a total of N7.315tn from the Federation Account Allocation Committee in 2025, compared with N5.186tn in 2024. The year-on-year increase of roughly N2.13tn represents a jump of about 41 per cent in direct FAAC allocations to states.
When the constitutionally mandated 13 per cent derivation revenue is added, total inflows attributable to states climbed to N8.934tn (about N9tn) in 2025, up from N6.533tn in 2024, a rise of N2.4tn or 36.74 per cent.
This surge came against the backdrop of a sharp expansion in total FAAC distributions. Aggregate allocations to the three tiers of government, including derivation, rose from N15.259tn in 2024 to N21.897tn in 2025.
States therefore captured a substantial share of the overall increase, both in absolute terms and as a proportion of total federation revenues. Without the 13 per cent derivation component, states’ N7.315tn allocation in 2025 accounted for about 33.4 per cent of the N21.897tn total FAAC disbursement for the year, compared with roughly 34.0 per cent in 2024.
When derivation revenue is included, total state-linked receipts of N8.934tn represented about 40.8 per cent of total FAAC disbursements in 2025, down from around 42.8 per cent in 2024, indicating that while inflows grew in nominal terms, their relative share declined as allocations to all tiers expanded.
A closer look at monthly disbursements shows that state allocations improved steadily throughout 2025. States received N498.50bn in January, well above the N396.69bn recorded in January 2024.
Monthly allocations continued to trend higher, peaking at N727.17bn in October before easing to N601.73bn in December. By contrast, only two months in 2024 recorded allocations above N500bn, with the highest monthly figure being N549.79bn in December.
By the end of June 2025, states had already received over N3.32tn, compared with about N2.33tn in the first half of 2024, easing short-term liquidity pressures, particularly for states with heavy wage bills and debt service obligations.
Derivation revenue also played a critical role. In 2025, derivation payments rose to N1.619tn from N1.347tn in 2024, an increase of about N272bn or just over 20 per cent. Monthly derivation inflows were especially strong in September 2025, when oil-producing states shared N183.01bn, compared with N99.47bn in September 2024.
Despite the surge, states did not disproportionately outpace other tiers. Federal Government allocations rose from N4.951tn in 2024 to N7.613tn in 2025, while local government allocations increased from N3.774tn to N5.351tn.
Nevertheless, the impact on states is particularly significant given their responsibility for delivering education, healthcare, and infrastructure. The additional N2.4tn received in 2025 alone is equivalent to nearly half of what states received from FAAC in total in 2024.
The 10th edition of the BudgIT State of States Report, titled ‘A Decade of Subnational Fiscal Analysis: Growth, Decline and Middling Performance’, revealed that over 30 states rely heavily on FAAC allocations.
An executive of BudgIT said on Channels Television’s Politics Today programme, “At least thirty states, excluding Lagos, Ogun, and Enugu, relied on FAAC for more than sixty per cent of their recurrent revenue. Lagos remains an outlier, but Ogun and Enugu also seem to be performing quite well.
“In total, 31 states depended on FAAC for at least 80 per cent of their current revenue, which shows just how challenging the fiscal situation has become for many of them.
“For example, Lagos’s FAAC allocation rose from N4.24bn to N11.38bn, a massive increase that highlights how significant federation account transfers have become within a single fiscal year. Still, credit should go to the states that recorded strong year-on-year growth, as well as those that grew consistently over the ten-year period we reviewed.”
The report added that 29 states relied on FAAC receipts for at least half of their total revenue, 28 relied on it for at least 55 per cent, and 21 relied on it for over 70 per cent.
The BudgIT executives expressed concern that rising FAAC inflows were discouraging states from expanding internally generated revenue. This is “concerning because the more FAAC money states receive, the less incentive some of them have to develop their own internal revenue sources”.
They noted that “the proportion of IGR within total recurrent revenue declined slightly from 25.27 per cent in 2023 to 20.27 per cent in 2024, indicating continued dependence on federal transfers”.
The Managing Director of Optimus by Afrinvest, Dr Ayodeji Ebo, said, “These revenues are volatile and largely outside state control, making budgets vulnerable to oil price shocks. Over time, this approach also discourages ingenuity, as states become dependent on external inflows rather than building durable local revenue sources.”
A development economist and Chief Executive Officer of CSA Advisory, Dr Aliyu Ilias, said subnational governments are creating challenges for the federation through how they manage FAAC allocations.
He suggested “counterpart funding,” where states that increase their IGR receive proportional benefits, warning that without incentives, states would continue to rely heavily on Abuja. Ilias said, “While FAAC allocations are at unprecedented levels, they are not necessarily translating into improved living standards.”
NLC speaks
The country’s biggest labour union said rising FAAC allocations have failed to deliver meaningful benefits to citizens, blaming weak governance, misplaced priorities, and persistent corruption at the state level.
“Very few states are doing well in terms of how they deploy what they receive,” Assistant Secretary-General of the NLC, Onyeka Christopher, said. “The idea behind federal allocations is to bring the government closer to the grassroots, but unfortunately, in many states, this has not translated into the desired results for well-known reasons.”
The NLC added that, “Once people know there are no consequences, they will continue to steal public funds,” warning that kleptocracy continues to undermine development. “For FAAC to truly benefit the people, the issue of kleptocracy must be addressed. What are the EFCC and ICPC doing?” it asked.
The MainPower Electricity Distribution Limited (MEDL) has commenced a major ₦3.5 billion network rehabilitation and upgrade programme aimed at improving the quality, reliability and sustainability of electricity supply across parts of Enugu State.
The projects are being implemented under the Distribution Sector Recovery Programme (DISREP), an initiative of the Federal Government of Nigeria supported by the World Bank.
The Managing Director of MainPower, Dr Ernest Mupwaya, told newsmen in Enugu on Thursday that DISREP would strengthen Nigeria’s electricity distribution sector through metering, rehabilitation of critical infrastructure, reduction of technical and commercial losses, and improvement in service delivery.
He said that the first phase of the scope of the projects cover the rehabilitation and upgrading of the following critical infrastructure: the 9th Mile Injection Substation; the 9th Mile Industrial Feeder; and the Coca-Cola 33 kV Feeder.
“It will also cover installation of seven new 500 kVA, 11/0.415 kV distribution transformers; rehabilitation of 10 existing 500 kVA distribution transformers; and provision of 11 kV switchgear to improve system protection, control and operational flexibility.
“The works are expected to be completed within five weeks. Contractors will work daily, including weekends, to ensure timely delivery,” he said.
The managing director stressed that a major component of the project is the upgrade of the approximately 28-kilometre Coca-Cola 33 kV Line running from the Oji River Transmission Station to the 9th Mile Injection Substation.
“The line, which currently operates on a 50mm² aluminium conductor single circuit, will be upgraded to a 150mm² Aluminium Conductor Steel Reinforced (ACSR) double circuit.
“The upgraded line will have a combined design thermal transfer capability of up to 36MW, subject to prevailing system conditions, voltage regulation and other operational requirements.
“The additional capacity will strengthen electricity supply to the 9th Mile industrial axis and support existing and prospective industrial customers,” he said.
Mupwaya said that the beneficiaries would include the following companies: Sapphire, 7-Up, Honest Material, Coca-Cola, Wisdo, Enugu Water Works and others, as well as customers supplied through the 11 kV industrial feeder.
He noted that the project would also relieve the Kingsway 2 Line, which serves Ogui and the Hilltop axis, thereby improving network flexibility and reliability in those areas.
On the 9th Mile Power Corridor, he noted that the existing undersized 70mm² aluminium conductor on the 9th Mile 11 kV industrial feeder would be replaced with a 150mm² aluminium conductor from the injection substation.
He said, “This upgrade will address existing capacity constraints, reduce technical losses, improve voltage profiles and create additional capacity to accommodate growing industrial and commercial demands.
“Upon completion, the project is expected to significantly improve electricity supply to customers in Udi and Ezeagu Local Government Areas, including: 9th Mile industrial hub; the Free Trade Zone; Ezeagu industrial cluster; Abor; Ajali; and surrounding communities.”
The MainPower boss said that the rehabilitation programme forms part of MainPower’s broader commitment to strengthening the electricity distribution network and providing the infrastructure required to support industrial growth, business expansion and improved socioeconomic activity across Enugu State.
He also explained that in order to provide a safe working environment and facilitate the efficient execution of the works, scheduled outages would occur during the five-week construction period.
“The outages will generally take place between 8a.m. and 2p.m., during which electricity supply to affected customers will be temporarily interrupted.
“MainPower appreciates the operational implications of these outages, particularly for industrial and commercial customers, and appeals for their patience, understanding and cooperation.
“The temporary disruptions are necessary to enable the rehabilitation works to be completed safely and within the planned timeframe,” he said.
Mupwaya noted that the rehabilitation would require the clearance of structures and commercial activities encroaching on the statutory powerline right-of-way, adding that such encroachments would be addressed in accordance with applicable safety requirements and established procedures.
“Customers and members of the public are advised not to erect structures, operate businesses or undertake any activity within powerline rights-of-way.
“These corridors must remain clear to protect lives, facilitate maintenance and ensure the safe operation of electricity infrastructure,” he said.
He also appealed to customers and members of communities within the projects corridor to protect the new electrical installations and give contractors maximum cooperation to deliver the work as scheduled.
Inspiration most at times comes from leaders who are audacious. The present regime in Ebonyi State has weaponized the system against the people. Instead of working to provide *welfare and security*, which is the primary duty of every government, for the people they govern, the system has become a terror against the citizens.
The vision of Dr Anyichuks Odii, the PDP governorship candidate to reconstruct Ebonyi state, economically, politically and developmentally is well known. *Under his government, the people will rejoice because the Bible says that *WHEN THE RIGHTEOUS IS IN AUTHORITY, THE PEOPLE REJOICE, BUT WHEN THE WICKED BEAR RULE, THE PEOPLE MOURN*!
This is the position of what is taking place in Ebonyi state today. The wicked is bearing rule, now in Ebonyi, the people are mourning. The present regime is bearing rule from a very wicked perspective hence the people are mourning.
*”I told them when we start campaigning, I will be campaigning as a private citizen. Show me what you have done, I will show you what I have done. If you can do it as a private citizen, I will surrender, I will resign and I will bow and allow you to continue…”* – Chief Dr. Ifeanyi Chukwuma Odii
This a very audacious declaration by the PDP governorship candidate in Ebonyi State, I want to say, *EBONYI RISE, A DANIEL HAS COME TO JUDGEMENT*
ANYICHUKS ODII IS HERE.
Dr. Kenneth Anozie
Political Analyst
Former Speaker of the Abia State House of Assembly and APC House of Representatives candidate for Ikwuano/Umuahia Federal Constituency, Rt. Hon. Chinedum Enyinnaya Orji, has said the recent Osun State governorship election proved that the Independent National Electoral Commission (INEC) can conduct free and fair polls, while President Bola Ahmed Tinubu’s transparency reforms are taking hold and redefining Nigerian democracy.
In an article titled “Transparency, Trust, and Transformation: Why INEC’s Credibility and Tinubu’s Reforms Are Redefining Nigerian Democracy,” Orji argued that transparency is the oxygen of true democracy, enabling free elections, economic growth, and citizens’ ability to hold leaders to account.
“Transparency is the oxygen of true democracy. Without it, elections become rituals, policies become decrees, and public trust erodes. With it, citizens can see the process, judge the outcomes, and believe that their votes and their taxes actually matter,” Orji wrote.
The former Speaker said President Tinubu’s commitment to openness is a governing philosophy anchored on the belief that legitimacy comes from process, not pronouncement.
He cited the Osun election as a defining moment for INEC’s credibility. According to Orji, despite widespread skepticism that the ruling APC had predetermined the winner, INEC conducted a free and fair election.
“To their dumbfounding surprise, INEC conducted a free and fair election. Voters were accredited, results were transmitted, and party agents were allowed to witness the process at every level. The atmosphere reflected competition, not coercion,” he wrote.
Orji noted that Accord Party candidate Ademola Adeleke emerged as winner, adding that the outcome “cut across expectations and party lines” and forced even skeptical observers to reassess.
He said President Tinubu’s posture before, during, and after the election reinforced INEC’s credibility, adding that there was no directive from the Villa to skew the process.
“That is adherence to the Rule of Law in practice. When the head of government allows institutions to function independently, he is telling Nigerians that no one, including his own party, is above the process,” Orji stated.
The APC chieftain also linked INEC’s credibility to the administration’s economic transparency agenda, describing both as “two sides of the same coin.”
“One protects political rights, the other protects economic rights. Both depend on institutions being allowed to work,” he wrote.
On the removal of petroleum subsidy, Orji described the policy as a “difficult but necessary path” that has delivered immediate and measurable results.
“Federation allocations to states have quadrupled in many cases. Money that previously disappeared into subsidy payments is now flowing into state coffers,” he wrote.
He said governors across party lines now have more fiscal space to pay salaries, rehabilitate schools, invest in healthcare, and fix roads, adding that it is “only fair and only right” that they acknowledge President Tinubu’s role in the reform.
Orji said transparency in the reform matters because Nigerians can now see monthly FAAC figures published, track what comes into the federation account, and demand accountability from their state governments.
“When citizens know how much their state received, they can also ask how it is being spent. That is democracy extending beyond election day into governance itself,” he wrote.
He said the judiciary has also benefited from the executive’s respect for court judgments and due process, adding that public trust is being slowly rebuilt because people can point to concrete examples.
“Osun is one. Improved allocations is another. There is a pattern forming,” Orji stated.
He concluded that President Tinubu has demonstrated a consistent willingness to uphold the principles of democratisation—free elections, open policies, and governance that answers to the people.
“In the final analysis, transparency is not a slogan. It is an enabler. It enables free elections, it enables economic growth, and it enables citizens to hold leaders to account,” he wrote.
“That is the standard Nigerians should now demand, and it is the standard this administration has set.”
The Chief Imam of 81 Division of the Nigerian Army, Lt.-Col. Husein Eleje, has charged Nigerians emulate and imbibe Prophet Muhammad’s peaceful, truthful and just lifestyle in order to build a progressive nation.
Eleje gave the charge in an interview on Tuesday from Abakaliki, Ebonyi State to commemorate Eid-el-Maulud celebration being the celebration of the birth of the Holy Prophet Muhammad (may Allah’s peace be upon Him).
He said that Muhammad, who was born at Middle-East in Saudi Arabia in the year 570 AD, displayed worthy character among all people and was known as “a trustworthy, honest and simple person”.
According to him, so the celebration of the Maulud is done to emulate the good life-style, which Prophet Muhammad lived.
“The Holy Prophet lived peaceful and humble life and always mediate among disputing parties. He never cheated anyone nor shy away from speaking the truth.
“Prophet Muhammad associated freely, traded, worked together with the common people to establish a city (Medina) where people of different faiths lived together and practiced their faith and had freedom of worship.
“He stood against any oppression and injustice and he always say ‘your bloods are sacred, and your wealth and property are sacred’.
“To Him, it is prohibited for any one to harm his brother or take his property unjustly,” he said.
The cleric urged Nigerians to tolerate one another and protect the interest of one another as the Prophet had exemplified.
Eleje said that the Prophet humbled Himself to even those who followed and accept Islam as well as participated equally with them in any communal work to build the society.
“We must be a people who advocate for peaceful co-existence among others and our neighbours,” he added.
When Alhaji Atiku Abubakar recently said he would restore petroleum subsidy if elected president, he tapped into a familiar frustration. Fuel prices are high, transport costs bite, and households are feeling the squeeze. That pain is real. But the promise to bring back the old subsidy regime is not relief. It is a return to a policy that bled the treasury, starved the states, and kept Nigeria dependent on borrowing to buy fuel.
For decades the subsidy was sold as a welfare program for the poor. In practice it became the most expensive welfare program for smugglers, marketers, and a handful of importers. The Nigerian National Petroleum Company would claim billions monthly, and no one could audit where the product actually went. That was not social protection. That was fiscal leakage at scale.
The first and most immediate benefit of subsidy removal is fiscal breathing room. In 2022 alone, subsidy gulped over 4 trillion naira. That was more than we spent on education, health, and capital projects combined. When that money stopped going to fuel, it did not disappear. It stayed in government coffers, and a large share of it flows directly to the sub nationals through FAAC.
The sub nationals are where the difference is being felt most. States and local governments now receive significantly higher monthly allocations. Governors in Rivers, Lagos, Kano, and others have reported FAAC receipts nearly doubling compared to pre-removal levels. That is money that can pay teachers, fix primary health centers, and clear pension arrears without waiting for Abuja bailouts.
In Rivers State, for example, the additional resources have allowed the state government to accelerate road projects, expand the school feeding conversation, and invest in water and sanitation. Across the country, states are using the windfall to clear salary backlogs and to fund security. That is the direct link between subsidy removal and better services at your doorstep.
Beyond recurrent needs, the removal unlocked capital spending. With subsidy gone, the federal government and states are no longer borrowing just to keep petrol cheap. Instead, we are seeing commitments to CNG buses, mass transit, student loans, and conditional cash transfers. These are targeted interventions. They reach the vulnerable without subsidizing a businessman in Cotonou who drives across the border to buy cheap fuel.
One of the quietest but biggest wins is the end of the subsidy-driven smuggling economy. When Nigerian petrol was artificially cheap, an estimated 30 to 40 percent was leaving our borders daily. That drained our forex and rewarded criminal networks. With prices aligned to market, the incentive to smuggle collapsed almost overnight. That saves dollars and restores integrity to our supply chain.
Sub nationals also gained policy space. Before, states were trapped. They could not raise IGR fast enough to match their responsibilities because the center was spending all its revenue on fuel. Now, with more money coming from FAAC and with subsidy no longer a federal albatross, states can plan medium-term budgets. They can borrow for infrastructure knowing their revenue base is real, not propped up by a phantom fuel bill.
The macroeconomic case is just as strong. Subsidy removal freed up foreign exchange that was being used to import and “subsidize” fuel. That pressure contributed to naira volatility. With the drain gone, the CBN has more room to stabilize the market, and investors see a government willing to make hard choices. Confidence matters for FDI, and FDI builds factories, not just fuel stations.
Let us be honest about the counterargument. Atiku and others argue that Nigerians cannot afford the current prices and that government should cushion the pain by restoring subsidy. The compassion is understandable. But the method is wrong. A blanket subsidy is the bluntest tool possible. It subsidizes the rich who own three cars, it subsidizes generators in malls, and it subsidizes our neighbors.
Targeted support is both cheaper and fairer. The savings from subsidy removal are already funding student loans, nano-grants, and public transport reforms. Those programs can be scaled. If we put 1 trillion naira directly into transport, health insurance, and food support, the impact on the poor will be ten times what the same 1 trillion did when spread thinly across every liter of petrol.
International experience backs this. Indonesia, India, and Ghana all removed fuel subsidies and redirected the savings to health, education, and cash transfers. In each case there was short-term pain, followed by stronger public services. Countries that reversed course and brought subsidies back, like Egypt in 2014 before its second reform, ended up in deeper debt crises.
Restoring subsidy now would also reverse private sector investment. Since the removal, private companies have begun investing in refineries, CNG conversion centers, and logistics. Dangote Refinery, modular refineries, and gas infrastructure are viable only because prices reflect costs. If we announce that subsidy will return, those investors pause. That means fewer jobs in Port Harcourt, Warri, and Lagos.
For the sub nationals, a return to subsidy is a direct pay cut. FAAC would shrink again. States would go back to borrowing to pay salaries. Projects started with the new revenues would stall. Local governments, which depend almost entirely on federal transfers, would be the first to feel it. That is not theoretical. We lived it for 20 years.
Atiku’s argument rests on the idea that the timing was wrong and the palliatives were insufficient. Fair critique. But the solution to poor implementation is better implementation, not abandoning the reform. We should demand faster rollout of CNG buses, more transparency in how FAAC windfalls are spent, and stronger monitoring of state budgets. We should not demand a return to the policy that caused the weakness.
The subsidy was also a corruption magnet. It created a system where claims were king and verification was optional. Removing it broke that cycle. Bringing it back without fixing the governance structure is inviting the same fraud, only now with higher global oil prices and a weaker naira.
There is also a climate and energy angle. Cheap petrol discouraged gas adoption and kept us locked into generators. With market pricing, CNG, electric tricycles, and solar become economically sensible. States can lead this transition because they now have the funds to subsidize conversion kits, not fuel itself.
Politically, the promise to restore subsidy sounds popular in the short term. But governance is about trade-offs. The trade-off here is clear: cheap fuel for a few months versus hospitals, roads, and jobs for years. Sub nationals have already shown what they can do with the extra money. To take it away is to punish the very level of government closest to the people.
Finally, debt. Subsidy was financed largely by borrowing and by unpaid arrears to NNPC. That debt was crowding out everything else. Every naira we do not spend on subsidy is a naira we do not have to borrow. That lowers interest payments, which in turn frees more money for states and local governments.
Nigeria does not need a return to the past. We need to finish the work of this reform. That means plugging leakages, auditing state spending, and scaling targeted support so no family is left behind.
Alhaji Atiku is a respected Nigerian, but on this point he is wrong. Restoring subsidy would undo the single most important fiscal correction we have made in a generation. It would hurt the states, weaken the naira, and put us back on the borrowing treadmill.
The better path is forward. Keep the subsidy gone. Let the sub nationals keep the resources. And let government prove that the savings can translate into tangible relief. That is how we turn pain into progress, and that is how we build a Nigeria that works beyond election cycles.
CHINEDUM ENYINNAYA ORJI writes from Amaokwe Ugba, Umuahia Ibeku and the All Progressives Congress Candidate for Ikwuano Umuahia Federal Constituency.
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