Economist Accuses FG of Retaining N1.1 Trillion Before May FAAC Allocation, Citing Fiscal Federalism Distortion

Mr. Dele Oye, Chairman of the Alliance for Economic Research and Ethics (AERE), has accused the federal government of retaining approximately N1.1 trillion from the federation account before disbursing the May 2026 Federation Account Allocation Committee (FAAC) revenue. Oye characterized this action as a significant distortion of fiscal federalism, effectively allowing federal authorities to appropriate 32% of the total federation revenue at source.

According to FAAC records cited by Oye, the federation generated a gross revenue of N3.40 trillion in May 2026. However, only N2.30 trillion, or about 68% of the total, was distributed among the federal, state, and local governments. The remaining N1.10 trillion was deducted upfront to cover various intervention and statutory obligations, thereby reducing the funds available to subnational governments.

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Of the gross revenue, only N2.30 trillion (68 per cent) was distributed among the three tiers of government, while N1.10 trillion (32 per cent) was deducted at source. This high deduction rate, driven primarily by intervention funds, effectively recentralises fiscal resources and constrains subnational fiscal capacity.

Oye argued that this high deduction rate, largely driven by intervention funds, recentralizes fiscal resources and significantly constrains the financial capacity of states and local government councils. He proposed that a mandatory savings threshold of between five and 10 percent of the gross federation revenue should be channeled into the Sovereign Wealth Fund before any distribution occurs.

The economist further pointed out that the federal government's influence over federation revenues extends beyond its direct allocation. Due to its control over the administration of intervention funds and other deductions, the central government effectively manages a much larger share of the nation's gross revenue than its official allocation suggests. Data from the May FAAC disbursement showed states receiving N759.14 billion (33%), local governments N534.28 billion (23.2%), and oil-producing states N188.13 billion as derivation revenue. Oye specifically drew attention to the N500 billion National Security Emergency Fund as a substantial deduction.

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The federal government’s direct allocation of 35.4 per cent represents only part of its fiscal command. When combined with its administrative control over the N1.10 trillion in deductions, particularly the substantial intervention funds, the central government effectively manages a significantly larger share of the nation’s gross revenue.