The Federal Government, the 36 states and the 774 local government councils shared N3.007 trillion in revenue for July 2026, as the Federation Account Allocation Committee (FAAC) urged all tiers of government to convert rising revenues into lasting fiscal strength and sustainable social investments.
The call was made during the FAAC meeting, which reviewed the state of the economy, fiscal governance and the financial position of the federal and subnational governments.
The committee noted that gross Federation Account revenues had risen significantly over the past three years, largely driven by the removal of fuel subsidy, exchange-rate unification and tax reforms.
It, however, cautioned governments against treating the revenue increase as a temporary windfall, urging them to use the period of improved revenue to implement reforms that would strengthen public finances and support long-term development.
Under the July allocation, the Federal Government received N1.146 trillion, while the states shared N943.352 billion and local government councils received N673.649 billion.
In addition, N243.478 billion, representing 13 per cent derivation revenue from mineral resources, was distributed to benefiting states.
The committee said gross statutory revenue increased to N4.359 trillion in July from N3.700 trillion in June, representing an increase of N658.087 billion or 17.8 per cent.
Gross Value Added Tax (VAT) revenue, however, remained relatively stable at N793.968 billion, compared with N799.746 billion in June, representing a marginal decline of N5.778 billion or 0.7 per cent.
The committee attributed the improvement in statutory revenue to increased receipts from several sources, including Petroleum Profit Tax, Hydrocarbon Tax, Companies Income Tax, Capital Gains Tax, Stamp Duty Tax, petroleum royalties, mineral royalties, excise duty and gas-flaring penalties.
The gains were partly offset by declines in VAT, import duty, CET levies, rental of gas-flared fees and miscellaneous oil revenue.
FAAC said it would continue to work with revenue-generating agencies to address collection gaps and improve remittance discipline.
A major issue highlighted at the meeting was the impact of the Nigeria Tax Act 2025, which took effect on January 1, 2026.
Under the new framework, the states’ share of VAT revenue increased from 50 per cent to 55 per cent, while the Federal Government’s share fell from 15 per cent to 10 per cent.
The reform also provides that 30 per cent of the states’ VAT pool should be allocated according to the place where consumption occurs rather than the registered headquarters of companies.
According to the committee, the change creates a stronger link between economic activity within a state and the revenue it receives from the Federation Account.
Against the backdrop of the improved revenue position, FAAC identified six key areas, described as “vital signs”, that federal and state governments should strengthen to achieve lasting fiscal stability.
They include revenue quality, asset strength, economic growth, capital attraction, human capital and institutional capacity.
On revenue quality, governments were urged to diversify internally generated revenue beyond narrow tax bases and reduce excessive dependence on Federation Account allocations.
The committee also called for comprehensive inventories of government-owned assets and measures to put idle assets into productive use.
On economic growth, governments were encouraged to measure and expand their economies, including through the development and use of official state Gross Domestic Product data.
FAAC also stressed the importance of creating stable and predictable business environments capable of attracting domestic and foreign investment.
It urged governments to strengthen investor engagement and create conditions that would encourage long-term capital inflows.
Human capital development was also highlighted, with governments encouraged to sustain investments in education and healthcare as foundations for future economic growth.
The committee further called for improvements in what it described as the “institutional plumbing” of public finance, including timely, audited and transparent government accounts.
All tiers of government were encouraged to use the current period of strong revenue growth to institutionalise reforms such as comprehensive asset registers, payroll verification and timely publication of audited financial statements within the next 12 months.
FAAC also reaffirmed the need for full, transparent and timely remittance of collectible revenue by all revenue-generating agencies into the Federation Account ahead of the planned accounts reconciliation exercise.
The committee said revenue diversification remained critical to strengthening Nigeria’s fiscal position, particularly through tax administration reforms and increased mobilisation of non-oil revenues.
It also called for continued monitoring of solid minerals and other non-oil royalty streams, which it identified as potential sources of future Federation revenue.
The meeting further stressed the need for coordination between FAAC’s technical work and the National Council on Finance and Economic Development (NACOFED) on fiscal policy, revenue sharing and broader economic priorities.
FAAC said sustaining the gains recorded in July would depend on continued discipline in revenue collection and remittance by Ministries, Departments and Agencies.
It reiterated its support for reforms designed to make revenue allocations to the three tiers of government more predictable while strengthening the overall fiscal architecture of the Federation.
