March 3, 2025/CSL Research
The Federation Account Allocation Committee (FAAC), at its February 2025 meeting held in Abuja shared a total sum of N1.703 trillion among the Federal Government (N552.59bn), States (N590.61bn), and Local Government Councils (N434.57bn). Additionally, oil-producing states received N125.28bn as derivation fund (13% of mineral revenue).
This total represents a 19.6% increase from the previous month’s allocation of N1.42 trillion. The N1.703 trillion total distributable revenue comprised distributable statutory revenue of N749.727bn, distributable Value Added Tax (VAT) revenue of N718.781bn, Electronic Money Transfer Levy (EMTL) revenue of N20.548bn, and an augmentation of N214 billion. It is worthy of note that the distributable revenue is being augmented for the first time in many years.
Augmentation refers to the practice of supplementing revenue shortfalls in the Federation Account using extra-statutory funds. When the actual revenue available for distribution among the three tiers of government falls below the budgeted amount in the Appropriation Act for the month, the Federal Government typically turns to the Excess Crude Account (ECA)—a special reserve funded by surplus earnings from crude oil sales when the market price exceeds the budgeted benchmark. Crude oil sales remain the primary source of statutory revenue for the Federation Account.
However, despite a relatively stable average crude oil price of US$86.5 per barrel over the past 36 months, production has been severely affected by theft, frequent terminal shutdowns, vandalism, and poor maintenance.
These challenges have significantly reduced output, limiting the funds available for distribution.
Since the removal of the PMS subsidy in June 2023, monthly FAAC disbursements have averaged around ₦1.21 trillion. At the state level, most states—except Lagos, Ogun, and the FC—remain heavily dependent on FAAC allocations, with over 74% of their revenue derived from this source. This reliance means that any significant reduction in FAAC disbursements could severely impact their ability to fund both recurrent and capital expenditures, particularly given the additional financial burden of the recent minimum wage increase, which states are expected to implement.
Global crude oil prices have seen a moderate decline, averaging US$74.7 per barrel in February, down from US$78.2 per barrel in January 2025. Looking ahead, a Donald Trump presidency could significantly influence global oil prices, given his emphasis on energy independence and deregulation. While an increase in U.S. oil production under his administration could initially drive prices lower, geopolitical uncertainties and shifting demand patterns may introduce volatility. For oil-dependent economies like Nigeria, prolonged low prices could create fiscal pressures, straining government revenues.
Click here to download full report: CSL Nigeria Daily – 03 March 2025 – FAAC….pdf
