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By Chinwendu Obienyi
Nigeria’s swelling Federation Account Allocation Committee (FAAC) purse of N10.45 trillion in just five months may have offered Abuja and the 36 states a fiscal breather, but economic experts are warning that the relief is fragile and could prove short‑lived.
Between January and May 2026, the Federation Account Allocation Committee (FAAC) disbursed N10.45 trillion, representing a 25.85 per cent increase from N8.30 trillion recorded in the same period of 2025, yet underlying structural weaknesses remain largely untouched.
FAAC allocation refers to the monthly sharing of revenue collected by the Federation Account Allocation Committee (FAAC) among Nigeria’s three tiers of government:
The money comes from revenues that flow into the Federation Account, mainly from sources such as; crude oil and gas revenues, company income tax, customs duties, value added tax (VAT) and other federally collected revenues.
It will be recalled that at least a total of N1.96 trillion, N1.89 trillion and N2.04 trillion was disbursed to the three tiers of government in January, February amd March.
Subsequently, the amount dsbursed in the month of April and May stood at N2.26 trillion and N2.30 trillion, respectively. Of this amount, the FG received N3.72 trillion, states got N3.56 trillion while local governments councils received N2.51 trillion. Total gross revenue available stood N13.76 trillion, the a 4.3 per cent increase on the N13.19 trillion recorded in the same period of 2025.
The federal government, states and local governments have all enjoyed fatter monthly allocations, driven by policy shifts such as fuel subsidy removal, exchange‑rate unification and tighter rules around oil‑revenue remittances.
Also, the buoyancy in statutory revenues, value added tax and FX‑related inflows has buttressed spending plans and helped many subnationals clear salary arrears and other short‑term obligations.
For an economy grappling with a cost‑of‑living crisis and revenue scarcity just a few years ago, the psychological impact of headline‑grabbing FAAC figures has been significant.
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However, experts who spoke to Daily Sun, caution that this upturn rests on shaky foundations.
They note that a substantial chunk of Nigeria’s earnings never even makes it into the distributable pool, with World Bank data showing that about 41 per cent of federation revenues over recent years has been swallowed by first‑line deductions and agency “costs of collection”.
According to them, these off‑the‑top charges, which fund key revenue‑collecting and regulatory agencies through fixed percentages of gross takings, operate as a parallel spending track largely outside the normal budget process, thinning out the resources available for actual development at federal and subnational levels. Vice-Chairman, Board of Directors at Highcap Securities, David Adonri who is also a stockbroker, noted that the other concern is volatility.
“The same reforms that swelled naira receipts, subsidy removal and FX liberalisation, also amplified Nigeria’s exposure to oil‑price swings and exchange‑rate risk, meaning today’s windfall can quickly evaporate if global or domestic conditions turn.
If we can remember, FAAC disbursements surged to record levels through 2024 and 2025, yet allocations fell during weaker months and did little to arrest rising poverty or inflation, underlining the disconnect between nominal revenue gains and real‑economy outcomes. So, i would say that stronger FAAC inflows should be seen as a “temporary relief” for public finances, not a sign that Nigeria’s fiscal woes are over”, Adonri said.
Head, Research at FSL Securities, Victor Chiazor, also pointed to the issue of how these allocations are spent.
“Civil society groups and labour unions argue that previous FAAC windfalls, estimated at around N9 trillion for states alone in 2025, have not translated into visible infrastructure, better schools or improved healthcare.
Instead, much of the additional cash appears to have gone into recurrent expenditure and the high cost of governance, while internally generated revenue as a share of total income has stagnated or even declined in some states”, Chiazor said.
This, he said, deepens moral hazard that the bigger the FAAC cheque, the weaker the incentive for governors to build robust local tax bases or diversify their economies.
Chiazor urged the federal government and states to treat the current FAAC boom as an opportunity to rebuild fiscal buffers, overhaul the opaque deduction and retention framework, and tilt spending decisively towards growth‑enhancing capital projects.
Without such discipline, Nigeria’s N10.45 trillion FAAC surge will be remembered less as a turning point and more as another fragile gain dissipated by inflation, leakage and business‑as‑usual politics.
