Despite receiving an estimated N9tn in Federation Account Allocation Committee (FAAC) inflows in 2025, state governors are facing mounting criticism from labour unions, civil society organisations and opposition parties over what they describe as limited improvements in citizens’ welfare.
FAAC allocations to states rose by over N2tn within one year, according to an analysis of federation account disbursement data published by the National Bureau of Statistics (NBS), highlighting the scale of the revenue increase that accrued to subnational governments in 2025 amid higher federation inflows.
The sharp rise has drawn criticism from organized labour and opposition parties, with the Nigeria Labour Congress (NLC) warning that higher allocations have failed to translate into meaningful welfare improvements due to weak governance, misplaced priorities and corruption at the state level.
Civil society organisations have also accused state governments of mismanaging the inflows and failing to convert increased revenues into visible development outcomes, while economists caution that continued dependence on federally shared revenue undermines sustainable development at the subnational level.
FAAC allocations rise sharply
Federation account disbursement data show that state governments received a total of N7.315tn from FAAC in 2025, compared with N5.186tn in 2024. The year-on-year increase of about N2.13tn represents a 41% rise in direct FAAC allocations to states.
When the constitutionally mandated 13% derivation revenue is included, total inflows attributable to states climbed to N8.934tn (about N9tn) in 2025, up from N6.533tn in 2024, representing an increase of N2.4tn or 36.7%.
This occurred against the backdrop of a broader expansion in total FAAC distributions. Aggregate allocations to the three tiers of government rose from N15.259tn in 2024 to N21.897tn in 2025.
Without derivation revenue, states’ N7.315tn allocation accounted for about 33.4% of total FAAC disbursements in 2025, compared with 34.0% in 2024. When derivation is included, total state-linked receipts represented 40.8% of total FAAC inflows, down from 42.8% in 2024, indicating that while nominal inflows rose significantly, states’ relative share declined as allocations expanded across all tiers.
Monthly inflows trend higher
A closer look at monthly disbursements shows steady improvement throughout 2025. States received N498.50bn in January, compared with N396.69bn in January 2024.
Monthly allocations peaked at N727.17bn in October before easing to N601.73bn in December. By contrast, only two months in 2024 recorded allocations above N500bn, with the highest being N549.79bn in December.
By the end of June 2025, states had received over N3.32tn, compared with N2.33tn in the first half of 2024, easing short-term liquidity pressures, particularly for states with heavy wage bills and debt service obligations.
Derivation revenue also increased significantly. In 2025, derivation payments rose to N1.619tn from N1.347tn in 2024. Monthly derivation inflows were strongest in September 2025, when oil-producing states shared N183.01bn, compared with N99.47bn in September 2024.
FAAC dependence remains high
The 10th edition of the BudgIT State of States Report, titled A Decade of Subnational Fiscal Analysis: Growth, Decline and Middling Performance, revealed that over 30 states remain heavily dependent on FAAC allocations.
A BudgIT executive said at least 30 states, excluding Lagos, Ogun and Enugu, relied on FAAC for more than 60% of their recurrent revenue, while 31 states depended on FAAC for at least 80% of their current revenue.
The report further noted that the proportion of internally generated revenue (IGR) within total recurrent revenue declined from 25.27% in 2023 to 20.27% in 2024, raising concerns that rising FAAC inflows may be discouraging states from expanding local revenue sources.
Managing Director of Optimus by Afrinvest, Dr Ayodeji Ebo, said FAAC revenues are volatile and largely outside state control, making budgets vulnerable to oil price shocks and discouraging innovation in local revenue generation.
A development economist and Chief Executive Officer of CSA Advisory, Dr Aliyu Ilias, said while FAAC allocations are at unprecedented levels, they are not necessarily translating into improved living standards, calling for incentive-based mechanisms to encourage states to grow their IGR.
Labour, CSOs fault governance
Assistant Secretary-General of the NLC, Onyeka Christopher, said higher allocations have failed to deliver meaningful benefits to citizens.
“Very few states are doing well in terms of how they deploy what they receive. The idea behind federal allocations is to bring government closer to the grassroots, but in many states this has not translated into the desired results,” he said.
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Chairman of the Centre for Accountability and Open Leadership, Debo Adeniran, said weak monitoring had allowed misuse of public funds, while Executive Director of CISLAC, Auwal Musa Rafsanjani, said there was little verifiable evidence that increased revenues were improving healthcare, infrastructure or agriculture.
Opposition parties raise concerns
Opposition parties across several states also questioned the impact of rising allocations, citing weak service delivery, rising living costs and limited development outside state capitals.
However, contrasting views emerged in some states. In Nasarawa State, opposition figures commended the administration for infrastructure development, while ruling parties in Bauchi and Kwara defended their records, citing investments in roads, education, healthcare and social intervention programmes.
