FG, States, LGs Share N3tn As FAAC Demands Fiscal Reforms

The Federal Government, the 36 states and the 774 local government councils shared a total of N3.007tn as revenue for July 2026, as the Federation Account Allocation Committee called for stronger fiscal reforms across the three tiers of government.

The call was made at the August meeting of the Federation Account Allocation Committee, held in Owerri, Imo State, where the committee also examined measures to convert rising federation revenue into sustainable fiscal strength and improved social investment.

FAAC said the meeting, held on the margins of the ongoing National Council of Federation and Economic Development, focused on the state of the economy, fiscal governance and the need to strengthen the fiscal capacity of federal and subnational governments.

The committee noted that gross statutory revenue had risen significantly over the past three years, driven largely by subsidy removal, exchange-rate reforms and tax reforms.

It, however, cautioned governments against treating the increase in revenue as a temporary windfall, urging them to use the period of stronger allocations to implement reforms that would strengthen their finances over the long term.

According to FAAC, gross statutory revenue rose to N4.359tn in July, representing an increase of N658.087bn, or 17.8 per cent, from the N3.700tn recorded in June.

Gross Value Added Tax revenue, however, remained broadly stable at N793.968bn in July, compared with N799.746bn in June, representing a marginal decline of N5.778bn, or 0.7 per cent.

FAAC attributed the increase in statutory revenue to stronger collections from several revenue sources, including Petroleum Profit Tax, Hydrocarbon Tax, Companies Income Tax, Capital Gains Tax, Stamp Duty Tax, petroleum royalties, mineral royalties, excise duty and gas flared penalties.

The gains were partly offset by declines in VAT, import duty, Common External Tariff levies, rental of gas-flared fees and miscellaneous oil revenue.

The committee said it would continue to work with revenue-generating agencies to address collection gaps and improve remittance discipline.

It also called on governments to strengthen six key areas identified as critical to fiscal sustainability.

These include improving the quality of internally generated revenue, putting idle government assets to productive use, expanding economic activity, attracting private capital, investing in human capital and strengthening public financial management.

FAAC urged states to diversify their own-source revenue beyond narrow tax bases and develop comprehensive registers of government-owned assets.

It also encouraged states to measure and expand their economies, including through the production of official state-level Gross Domestic Product data.

On investment, the committee stressed the need for governments to create stable and predictable business environments while adopting structured approaches to engaging investors.

It further emphasised sustained investment in education and healthcare as essential to building the human capital required for long-term economic growth.

FAAC also called for timely, audited and transparent public accounts, including stronger payroll verification and improved public financial management systems.

The committee said governments should use the current period of stronger revenue growth to institutionalise these reforms within the next 12 months.

The meeting also examined the impact of the Nigeria Tax Act 2025, which took effect on January 1, 2026.

Under the new framework, states’ share of VAT revenue increased from 50 per cent to 55 per cent, while the Federal Government’s share fell from 15 per cent to 10 per cent.

FAAC noted that 30 per cent of the states’ VAT pool is now allocated according to the place of consumption rather than the registered headquarters of companies.

The committee said the change would more directly link a state’s economic activity and consumption levels to the size of its federation allocation.

It also reaffirmed its commitment to full, transparent and timely remittance of collectible revenue by all revenue-generating agencies into the Federation Account.

FAAC said this would be particularly important ahead of the reconciliation of federation accounts.

The committee further reiterated the need to diversify federation revenue beyond crude oil by strengthening tax administration and non-oil revenue mobilisation.

It identified solid minerals and other non-oil royalty streams as areas with potential to contribute more significantly to federation revenue.

FAAC said sustaining the revenue gains recorded in July would depend on continued discipline in revenue collection and remittance across Ministries, Departments and Agencies.

The committee also pledged to continue monitoring revenue performance while supporting reforms aimed at improving the predictability and growth of allocations to the Federal Government, states and local governments.