FG, States, LGs Share N1.298tn Revenue for September – FAAC

The Federal Account Allocation Committee (FAAC) has distributed a total of N1.298 trillion among the Federal Government, state governments, and local governments as revenue generated for September 2024. The revenue sharing, which took place during the FAAC’s monthly meeting, reflects continued efforts to distribute the nation’s wealth equitably among the three tiers of government.

The allocation was announced in Abuja by FAAC officials after their routine revenue-sharing meeting. The committee’s breakdown of the funds highlights the contributions from various revenue sources, including oil earnings, non-oil revenue, and value-added tax (VAT), all of which form the foundation of the distribution formula. This revenue sharing comes as the nation continues to grapple with various economic challenges, including inflation and currency devaluation, which have placed additional pressure on public finances.

Breakdown of the Revenue Allocation

The total distributable revenue of N1.298 trillion represents funds collected from oil, non-oil, and VAT sources. These funds are divided among the three tiers of government, with each receiving its designated portion in accordance with Nigeria’s revenue allocation formula.

1. **Federal Government**: The Federal Government received N488.9 billion from the total distributable revenue. This sum includes allocations for federally collected revenue, mineral-related revenues, and VAT.

2. **State Governments**: The 36 states collectively received N416.1 billion. State governments rely heavily on these funds to finance key sectors such as education, healthcare, and infrastructure development.

3. **Local Governments**: Local governments across the country were allocated N318.8 billion, which is expected to aid in grassroots development efforts and support local-level projects, including rural infrastructure and primary healthcare.

4. **Oil-Producing States**: An additional N74.2 billion was distributed to oil-producing states under the 13% derivation principle. This reflects revenue from the sale of crude oil and natural gas, which continues to be a major revenue source for the nation.

### Sources of Revenue

The N1.298 trillion in September revenue was generated from several sources, with oil revenue, VAT, and customs duties being the major contributors. Despite challenges in the oil sector, such as production shortfalls and fluctuating global oil prices, Nigeria’s oil revenue remains a significant part of the overall revenue allocation. Non-oil revenue, which includes VAT, company income tax (CIT), and customs duties, also played an important role in generating funds.

1. **Oil Revenue**: Despite production cuts by the Organization of Petroleum Exporting Countries (OPEC) and the drop in crude oil prices, oil revenue remains vital to Nigeria’s economy. Oil sales, royalties, and petroleum profit taxes were key contributors to the September revenue.

2. **Non-Oil Revenue**: Non-oil revenue contributed significantly to the September disbursement. VAT, CIT, and customs duties form part of this revenue stream. In recent years, the government has intensified efforts to diversify revenue generation, reducing reliance on oil earnings by boosting collections from non-oil sectors.

3. **VAT**: VAT accounted for a substantial portion of the non-oil revenue. VAT collection has been on the rise due to improved tax compliance efforts and policy reforms aimed at expanding the tax base. These efforts are helping to cushion the impact of fluctuating oil revenues.

### Revenue Challenges and Economic Implications

Nigeria’s public finances have been under pressure due to rising inflation, the depreciation of the naira, and the cost of servicing the national debt. The distribution of September’s revenue provides vital support to the three tiers of government as they navigate these economic difficulties. However, the rising cost of governance and increasing demands for public services present ongoing challenges.

1. **Inflation and Public Spending**: With inflation surging to 32.70% in September, the cost of goods and services has increased sharply, placing further strain on government budgets. States and local governments, which rely on FAAC allocations for the bulk of their revenue, face growing difficulties in funding essential services such as healthcare, education, and infrastructure.

2. **Oil Revenue Volatility**: Although oil revenue continues to be a major source of income, the volatility of global oil markets presents a risk to Nigeria’s fiscal stability. Fluctuating oil prices, coupled with OPEC’s production limits, have periodically reduced Nigeria’s oil earnings, making it harder to meet revenue targets.

3. **Debt Servicing**: The growing burden of debt servicing is another concern for Nigeria’s public finances. With an increasing portion of government revenue being directed toward debt repayments, less is available for developmental projects and public services, leading to calls for better debt management and fiscal reforms.

Fiscal Responsibility and Accountability

The FAAC plays a crucial role in ensuring that Nigeria’s wealth is equitably distributed, but there are ongoing concerns about fiscal responsibility at all levels of government. Transparency and efficient use of allocated funds are essential for maximizing the impact of these distributions on national development.

1. **Accountability at State and Local Levels**: While the monthly FAAC disbursements provide much-needed revenue to state and local governments, questions remain about how effectively these funds are used. In many states, there is a gap between the allocation of funds and the quality of services delivered to the public, highlighting the need for greater transparency and accountability.

2. **Diversification of Revenue Sources**: To address the challenges posed by oil revenue volatility, the Federal Government continues to push for the diversification of revenue sources. By strengthening non-oil revenue streams such as VAT and customs duties, the government aims to reduce its dependence on oil and create a more stable financial foundation for the future.

Looking Ahead

The N1.298 trillion distributed by FAAC in September underscores the importance of these allocations in keeping the wheels of governance turning. However, with the economy facing multiple challenges, including inflation, high debt, and fluctuating oil revenue, the need for fiscal reforms and greater financial prudence is more pressing than ever.

To ensure long-term fiscal sustainability, both the Federal and state governments must focus on diversifying the revenue base, improving tax collection efficiency, and promoting fiscal responsibility. Through these measures, Nigeria can better weather economic challenges and work toward a more stable and prosperous future for its citizens.

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