The Federation Accounts Allocation Committee (FAAC) has disbursed a total of N1.68 trillion to the three tiers of government for the month of February 2025, reflecting a notable decline in revenue collections compared to the previous month. The figure, announced in a communiqué following the committee’s March meeting in Abuja, was impacted by a significant drop in Value-Added Tax (VAT) revenue, which fell by N117.43 billion, from N771.89 billion in January to N654.46 billion in February.
The FAAC meeting, chaired by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, also marked the first official attendance of the newly appointed Accountant General of the Federation, Shamsedeen Ogunjimi. The committee attributed the decline in distributable revenue to reductions in several key revenue streams, including VAT, Petroleum Profit Tax (PPT), Company Income Tax (CIT), excise duty, and import duty. These drops collectively reduced the total revenue available for sharing among the federal, state, and local governments.
According to the communiqué, the gross statutory revenue available for distribution in February stood at N1.65 trillion, a decrease of N194.664 billion from January’s N1.85 trillion. The total distributable revenue of N1.678 trillion comprised several components: N827.63 billion from distributable statutory revenue, N609.43 billion from distributable VAT revenue, N35.171 billion from the Electronic Money Transfer Levy (EMTL), N28.218 billion from solid minerals revenue, and an augmentation of N178 billion.
Breaking down the allocation, the federal government received N569.656 billion, while state governments were allocated N562.195 billion. Local government councils received N410.559 billion, with an additional N136.042 billion distributed to mineral-producing states as 13 per cent derivation revenue. The communiqué further detailed that the total gross revenue available in February 2025 was N2.344 trillion. However, deductions amounting to N89.092 billion for the cost of collection, alongside transfers, interventions, refunds, and savings totalling N577.097 billion, reduced the net distributable amount.
From the N827.633 billion in distributable statutory revenue, the Federal Government took N366.262 billion, state governments received N185.773 billion, and local government councils got N143.223 billion. An additional N132.374 billion, representing 13 per cent of mineral revenue, was allocated to benefiting states as derivation revenue. The VAT revenue of N609.43 billion was shared as follows: N91.415 billion to the Federal Government, N304.715 billion to state governments, and N213.301 billion to local government councils.
Implications of the VAT revenue drop
The decline in VAT revenue has raised concerns about the country’s fiscal performance amid ongoing economic challenges. Analysts suggest that the drop could be linked to reduced consumer spending and lower economic activity, which directly impact VAT collections. Similarly, the reduction in PPT and CIT reflects lower profitability in the petroleum and corporate sectors, exacerbated by fluctuating global oil prices and domestic production challenges. The inclusion of solid minerals revenue, though a smaller portion of the total, highlights efforts to diversify Nigeria’s revenue base beyond oil.
This disbursement comes at a time when the government is grappling with the need to fund critical infrastructure projects, social programmes, and debt servicing. The N178 billion augmentation indicates a shortfall that required supplementary funding to meet allocation obligations, a practice that has sparked debates about fiscal sustainability.
Wale Edun, in his remarks during the meeting, emphasised the government’s commitment to improving revenue collection mechanisms and addressing leakages in the system. However, the latest figures suggest that more robust measures may be needed to stabilise federation account inflows. The presence of Shamsedeen Ogunjimi as the new Accountant General is expected to bring fresh perspectives to financial management at the federal level.
The FAAC disbursement remains a critical lifeline for states and local governments, many of which rely heavily on these funds for salaries, infrastructure, and basic services. The reduction in February’s allocation could strain budgets, particularly for states with limited internally generated revenue. As Nigeria navigates these fiscal challenges, the focus will likely shift to enhancing tax compliance, boosting non-oil revenue, and addressing structural inefficiencies in the economy.
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