Nigeria Records Historic ₦6 Trillion FAAC Disbursement in Q3 2025 as NEITI Warns of Fiscal Risks

Nigeria has recorded its highest-ever Federation Account Allocation Committee (FAAC) disbursement, with total allocations hitting ₦6.0 trillion in the third quarter of 2025, according to a new report released by the Nigerian Extractive Industries Transparency Initiative (NEITI).

The figure, which includes 13 per cent derivation payments to oil-producing states, represents a 55.6 per cent year-on-year increase compared with Q3 2024 and reflects more than a twofold rise in FAAC distributions over the past two years.

The disclosure is contained in NEITI’s Quarterly Review for Q3 2025, which points to improved revenue inflows and easing debt pressures on states, while cautioning that urgent policy actions are required to sustain the gains ahead of the final quarter of the year.

Federal, State, and Local Government Allocations

A breakdown of the disbursements shows that the Federal Government received ₦2.19 trillion, state governments shared ₦1.97 trillion, while local governments received ₦1.45 trillion during the quarter.

Statutory revenues accounted for 62 per cent of the total shared receipts, while Value Added Tax (VAT) contributed 34 per cent. The Electronic Money Transfer Levy (EMTL) and augmentation from non-oil excess revenue each contributed two per cent.

States’ allocations were drawn from statutory revenues, VAT, EMTL, and the Ecological Fund, with an additional ₦100 billion distributed as augmentation from the non-oil excess revenue account.

Lagos Tops State Allocations

Among the 36 states, Lagos State emerged as the highest recipient, receiving ₦179.3 billion in Q3 2025—an average monthly inflow of ₦59.76 billion. Kano State followed with ₦79.2 billion, while Rivers State received ₦78.8 billion.

At the lower end, Nasarawa State recorded the least allocation at ₦42.5 billion, followed by Ebonyi (₦42.9 billion) and Ekiti (₦43 billion).

NEITI noted that the gap between the highest and lowest state allocations stood at ₦136.8 billion, with Lagos receiving more than double the allocations of both Kano and Rivers, the second- and third-highest recipients.

Oil-Producing States Benefit from Derivation Revenue

The review further revealed that nine oil-producing states shared a combined ₦424 billion as 13 per cent derivation revenue, significantly altering overall allocation rankings.

Delta State emerged as the largest beneficiary, receiving ₦180.68 billion, followed by other major oil-producing states including Akwa Ibom, Bayelsa, and Rivers.

Decline in Debt Servicing Deductions

On debt servicing, deductions from states’ allocations amounted to ₦225.89 billion, representing a 6.5 per cent decline from the previous quarter.

The average debt service ratio across states stood at 9.4 per cent, with ratios ranging from 1.5 per cent to 26.8 per cent. Ogun State recorded the highest debt service ratio at 26.8 per cent, followed closely by Lagos State at 26.5 per cent, while Cross River State ranked third.

Outlook for Q4 2025 Raises Concerns

Looking ahead, NEITI cautioned that early Q4 2025 indicators suggest potential revenue pressures, driven by lower average oil prices and slightly higher exchange rates compared with Q3.

Average daily crude oil production declined from 1.64 million barrels per day in Q3 to 1.59 million barrels per day in the first month of Q4, a trend that could reduce foreign exchange inflows and distributable revenues if sustained.

The report also disclosed that no derivation revenue from the solid minerals sector was shared during the quarter due to negligible collections, noting that the last distribution from the sector occurred in August 2024.

NEITI Calls for Transparency and Fiscal Discipline

Commenting on the report, NEITI Executive Secretary, Musa Sarkin Adar, welcomed the strong remittance performance and declining debt burdens among states but warned that oil market volatility and optimistic budget benchmarks pose risks to fiscal sustainability.

To safeguard the gains, NEITI recommended the publication of up-to-date balances and liabilities of key federation accounts, including the Non-Oil Excess Account, Domestic Excess Crude Account, Stabilisation Fund, and Ecology Fund. The agency also called for clearer explanations of FAAC transactions to enhance transparency.

NEITI further urged consistent application of Appropriation Act benchmarks, effective use of the Stabilisation Account to smooth monthly disbursements, and regular transfers to the Nigeria Sovereign Wealth Fund to strengthen fiscal buffers.

Call for Revenue Diversification

The agency advised governments at all levels to adopt more conservative budget assumptions, accelerate revenue diversification—particularly in the mining sector, and fully implement petroleum industry reforms to boost domestic refining and value addition.

While describing the Q3 2025 FAAC performance as encouraging, NEITI stressed the importance of disciplined fiscal management to reduce vulnerability to commodity shocks.

“The Q3 2025 FAAC results are encouraging, but windfalls must be managed with discipline. Greater transparency, realistic budgeting, and stronger stabilization mechanisms will ensure these resources deliver durable benefits for all Nigerians,” Adar said.