A Quarterly Review of the Federation Accounts Allocation Committee (FAAC) released by the Nigeria Extractive Industries Transparency Initiative (NEITI) has revealed that the Federal Government deducted N800 billion from state allocations in 2024 to service foreign debts and other contractual obligations.
Acting Director of Communication and Stakeholders Management, NEITI, Mrs Obiageli Onuorah, said in a statement that the report highlights the financial strain on states due to debt repayments, despite record-high disbursements from FAAC.
According to the statement, total FAAC allocations rose to N15.26 trillion in 2024, marking a 43 per cent increase from the previous year.
The increase in the FAAC allocations was attributed to fiscal reforms, including the removal of fuel subsidies and exchange rate adjustments, which significantly boosted oil revenue remittances.
A breakdown of the disbursements showed that the Federal Government received N4.95 trillion, state governments got N5.81 trillion, and local governments were allocated N3.77 trillion.
According to the report, state governments recorded the highest percentage increase in allocations, rising by 62 per cent from N3.58 trillion in 2023 to N5.81 trillion in 2024.
It, however, noted that despite the higher allocations, states faced significant deductions, with N800 billion removed at source for foreign debt servicing and other obligations, a situation that placed additional fiscal pressure on many states, particularly those with lower revenues.
Lagos State had the highest debt deduction of N164.7 billion, representing over 20 per cent of total deductions. Kaduna followed with N51.2 billion, while Rivers and Bauchi had N38.6 billion and N37.2 billion, respectively.
The report warned that several states with high debt burdens also ranked lower in FAAC allocations, raising concerns about their fiscal sustainability and ability to fund critical projects.
“The report noted that many states with high debt ratios were in the lower half of the FAAC allocation rankings but ranked higher for debt deductions, raising concerns about their debt-to-revenue ratios and overall fiscal health,” the statement read in part.
Executive Secretary of NEITI, Dr Ogbonnaya Orji, explained that the increase in FAAC disbursements was driven by major fiscal reforms, particularly the removal of fuel subsidies in mid-2023 and adjustments to the foreign exchange policy, which increased naira-denominated mineral revenues by over 400 per cent.
He, however, cautioned that while these policies had significantly increased revenue, they had also introduced economic challenges, including inflationary pressures, rising debt servicing costs, and fiscal uncertainty for states heavily reliant on oil revenue.
The report showed that Lagos received the highest FAAC allocation in 2024 with N531.1 billion, followed by Delta with N450.4 billion and Rivers with N349.9 billion.
Conversely, Nasarawa, Ebonyi, and Ekiti received the least allocations of N108.3 billion, N110 billion, and N111.9 billion, respectively.
The six highest-receiving states, Lagos, Rivers, Bayelsa, Akwa Ibom, Delta, and Kano, accounted for 33 per cent of total allocations to states, while the six lowest-receiving states, Yobe, Gombe, Kwara, Ekiti, Ebonyi, and Nasarawa, accounted for only 11.5 per cent.
The agency recommended urgent measures to mitigate economic risks and ensure sustained revenue growth and also called for exchange rate stability to curb inflation, conservative crude oil price, and production estimates to prevent budget shortfalls, and diversification of revenue sources beyond oil and gas.
NEITI also urged all tiers of government to strengthen internal revenue generation and improve fiscal transparency in line with Open Government Partnership and Extractive Industries Transparency Initiative commitments.
It emphasised the need for accountability in managing public resources and urged stakeholders to use the report’s findings to monitor government spending effectively.
