In July 2024, the three tiers of government in Nigeria— the Federal Government (FG), States, and Local Governments (LGs)—shared a total of N1.4 trillion as revenue allocation. This substantial disbursement was facilitated by the Federation Account Allocation Committee (FAAC) and is intended to support the financial needs of the different levels of government across the country.
Breakdown of the Allocation:
1. Federal Government: The FG received the largest portion of the allocation, which includes funds for the country's central administration, security, defense, and various federal ministries and parastatals.
2. States: Each of Nigeria's 36 states received its share based on the revenue allocation formula. This formula considers various factors, including population, landmass, and the level of development needs. The allocation to the states is meant to support state-level projects, including education, health, infrastructure, and salaries.
3. Local Governments: The 774 Local Government Areas (LGAs) in Nigeria also received their share. These funds are crucial for grassroots development, including the provision of basic services, local infrastructure, and administration at the local level.
Sources of Revenue:
The N1.4 trillion allocation was derived from several key revenue streams:
- Petroleum Profit Tax (PPT): Significant earnings came from the petroleum sector, reflecting Nigeria's reliance on oil exports. This includes revenues from crude oil sales and taxes on petroleum products.
- Company Income Tax (CIT): Contributions from the private sector via corporate taxes played a vital role.
- Value Added Tax (VAT): The VAT collected on goods and services contributed substantially to the revenue.
- Customs and Excise Duties: Earnings from import and export tariffs also formed part of the allocation.
- Solid Minerals Revenue: Nigeria's solid minerals sector, though smaller than oil and gas, also contributed to the overall revenue.
Context and Implications:
The July 2024 allocation marked one of the highest revenue disbursements in recent times, highlighting the government's efforts to stabilize the economy and meet the financial obligations of its various administrative units. The allocation is expected to help fund various developmental projects, meet salary obligations, and boost economic activities at the state and local government levels.
However, the sustainability of such large allocations may depend on global oil prices, efficient tax collection, and economic diversification efforts. The government's ability to manage these funds effectively will be crucial in addressing ongoing challenges such as inflation, unemployment, and infrastructure deficits.
This distribution also comes at a time when many states and local governments are facing financial difficulties, making this injection of funds a critical lifeline for them to maintain essential services and invest in developmental projects.