Despite receiving an estimated N9tn in Federation Account Allocation Committee (FAAC) inflows in 2025, state governors are facing growing criticism from labour unions, civil society groups, and opposition parties over the limited impact of these funds on citizens’ welfare.
FAAC allocations to states rose by more than N2tn in a year, according to National Bureau of Statistics data compiled by The PUNCH. The sharp increase has prompted warnings from the Nigeria Labour Congress and other civil society organisations that higher revenues have not translated into visible improvements due to weak governance, misplaced priorities, and corruption.
Economists say the surge has expanded states’ fiscal space but caution that heavy reliance on federally shared revenue and poor internal revenue generation continue to undermine sustainable development. In 2025, states received N7.315tn from FAAC allocations, compared with N5.186tn in 2024, representing a 41 percent year-on-year increase. Including constitutionally mandated 13 percent derivation revenue, total state inflows reached about N8.934tn, up from N6.533tn in 2024.
Monthly allocations grew steadily, peaking at N727.17bn in October. Derivation payments also rose to N1.619tn, with oil-producing states sharing N183.01bn in September 2025. While federal and local governments also received higher allocations, states remain responsible for critical services like education, healthcare, and infrastructure, heightening public expectations for effective use of the funds.
The 10th BudgIT State of States Report revealed that over 30 states rely heavily on FAAC for more than 60 percent of recurrent revenue, with 31 states depending on FAAC for at least 80 percent. Analysts warn that dependence on federal transfers discourages states from expanding internally generated revenue, leaving them vulnerable to oil price volatility and fiscal shocks.
Development economists, including Dr. Aliyu Ilias of CSA Advisory, advocate for “counterpart funding,” where states boosting internal revenue benefit proportionally, warning that without incentives, FAAC windfalls may continue to deliver limited improvements in citizens’ living standards.
