The Federation Account recorded a total revenue inflow of N7.4 trillion in the first quarter of 2025, according to data from the Federation Account Allocation Committee (FAAC).
This revenue was remitted by major government revenue-generating agencies, including the Federal Inland Revenue Service (FIRS), Nigeria Customs Service, and others.
Of the total inflow, N4.96 trillion was distributed as statutory allocations among the Federal Government, 36 states, and 774 local government areas between January and March 2025.
The FAAC, chaired by the Minister of Finance, Mr. Wale Edun, comprises finance commissioners from all 36 states, the Accountant General of the Federation, and representatives from the Nigerian National Petroleum Company Ltd (NNPC), FIRS, Customs, Revenue Mobilisation, Allocation and Fiscal Commission, and the Central Bank of Nigeria (CBN).
Revenue Sharing Framework
The Federation Account operates under a legal structure that divides funds into three primary components:
- Statutory Allocation
- Value Added Tax (VAT) Distribution
- 13% Derivation Principle for oil-producing states
Under statutory allocation:
- The Federal Government receives 52.68%
- States receive 26.72%
- Local governments receive 20.60%
For VAT:
- The Federal Government gets 15%
- States, 50%
- Local governments, 35%
Oil-producing states also receive an additional 13% derivation fund.
Q1 Allocation Breakdown
Of the N4.96 trillion disbursed:
- The Federal Government received N1.65 trillion
- State governments, N1.68 trillion
- Local governments, N1.22 trillion
- Oil-producing states, N393.93 billion via the derivation fund
Monthly Breakdown
- January 2025
- Total revenue: N2.641 trillion
- Disbursed: N1.703 trillion
- FG: N552.59 billion
- States: N590.61 billion
- LGs: N434.56 billion
- Derivation fund: N125.28 billion
- February 2025
- Revenue declined to N2.344 trillion
- Allocation: N1.678 trillion
- FG: N569.65 billion
- States: N562.19 billion
- LGs: N410.56 billion
- Derivation fund: N136.04 billion (highest in the quarter)
- March 2025
- Revenue rose to N2.411 trillion
- Allocation: N1.578 trillion
- FG: N528.69 billion
- States: N530.45 billion
- LGs: N377 billion
- Derivation fund: N132.61 billion
Factors Behind Revenue Growth
FAAC attributed the improved revenue performance to:
- Increased oil revenues
- Stronger tax collection
- Gains from foreign exchange reforms
Fiscal Outlook and Government Response
Despite the improved revenue, economic analysts have urged all levels of government to manage the funds responsibly, especially amid:
- High inflation
- Exchange rate fluctuations
- Ongoing efforts to reduce dependence on oil revenue
In response to declining global oil prices, which have fallen below the $75 per barrel benchmark in the 2025 budget, the Federal Government announced plans to:
- Prioritize essential expenditures (salaries, pensions, debt servicing, and security)
- Increase oil production
- Implement cost-saving measures
Finance Minister Wale Edun emphasized the need for fiscal discipline:
“Our budget was based on 2 million barrels per day at $75 per barrel, and we are now underwater relative to those assumptions. When your budget revenue is below expectation, you have to hunker down, conserve, and prioritize.”
To bridge the budget shortfall, the government plans to:
- Optimize public assets
- Expand public-private partnerships
- Accelerate privatization efforts
Edun noted that the 2025 budget includes a provision for asset sales, which may exceed initial expectations due to rising investor interest.
He concluded that President Bola Tinubu’s economic agenda aims to stabilize the economy and attract investments that promote job creation and poverty reduction.
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