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.
