Reported by Ariajegbe Sylvia Esezobor
Nigeria’s three tiers of government have shared a total of N2.428 trillion from the Federation Account for September 2026, a modest but closely watched recovery driven by rebounding oil revenues and improved statutory receipts. The allocation, approved at the October meeting of the Federation Account Allocation Committee in Abuja, represents an increase of N90 billion, or 3.85 per cent, over the N2.338 trillion distributed in the preceding month. The figure was announced in a statement issued by Bawa Mokwa, Director of Press and Public Relations in the Office of the Accountant-General of the Federation, following the committee’s deliberations.
The recovery follows a sharp and unsettling decline in September, when FAAC allocations fell by N669 billion, or 22.2 per cent, from the record N3.007 trillion shared in August. That August peak was the highest monthly distribution in reviewed records dating back to 2019, making the subsequent drop a source of considerable anxiety for state governments already grappling with rising wage bills, infrastructure deficits, and mounting debt obligations. The October allocation, while an improvement, remains N579 billion, or 19.3 per cent, below the August high. It is also N122 billion, or 4.8 per cent, below the N2.550 trillion distributed in July, though it exceeds the N2.300 trillion shared in June.
At the heart of the rebound is a recovery in gross statutory revenue, which rose by N246.384 billion, or approximately 8.6 per cent, to N3.096 trillion in September from N2.850 trillion in August. That improvement came after a severe contraction in the preceding month, when statutory revenue plunged by N1.508 trillion from the N4.359 trillion recorded in July. The FAAC communiqué attributed the September increase to significantly higher receipts from Petroleum Profit Tax, Hydrocarbon Tax, petroleum royalties, import duty, Common External Tariff levies, and excise duty. These are the revenue streams most directly tied to oil sector activity and cross-border trade, and their recovery signals a partial stabilisation of Nigeria’s fiscal inflows after a volatile mid-year period.
The picture is not uniformly positive. Gross Value Added Tax collections declined by N17.972 billion, or 2.2 per cent, to N816.872 billion in September from N834.843 billion in August. That decline reversed the increase recorded in August, when VAT receipts had risen by N40.875 billion from N793.968 billion in July. The drop in VAT is notable because the tax is levied on consumption and is often viewed as a more stable and broadly shared revenue source than oil-derived income. Its decline suggests that consumer spending or compliance may have softened during the period, even as oil-related revenues recovered.
Total gross Federation Account revenue increased by N228 billion, or 6.2 per cent, from N3.685 trillion in August to N3.913 trillion in September. However, the rise in gross collections did not translate into a correspondingly large increase in distributable revenue. Deductions, transfers, refunds, and savings also grew. The communiqué indicated that N131.758 billion was deducted as the cost of collection in September, compared with N125.142 billion in August, an increase of N6.616 billion. Transfers, refunds, and savings rose by N131 billion, or 10.7 per cent, from N1.221 trillion to N1.352 trillion. Consequently, the amount available for distribution increased by only N90 billion despite the N228 billion rise in gross revenue.
The N2.428 trillion distributable revenue comprised N1.672 trillion in statutory revenue and N756.587 billion from VAT. The statutory component increased by N107 billion, or 6.8 per cent, from N1.565 trillion, reflecting the oil-linked recovery. The distribution of the funds followed the established formula. The Federal Government received N832.242 billion. The 36 state governments received N799.872 billion. The 774 local government councils received N560.660 billion. A further N236.049 billion was shared among oil-producing states as 13 per cent derivation revenue from mineral resources. A breakdown of the statutory revenue component showed that the Federal Government received N756.583 billion, states got N383.749 billion, local governments received N295.855 billion, and derivation beneficiaries shared N236.049 billion. From the VAT component, the Federal Government received N75.659 billion, states received N416.123 billion, and local governments got N264.805 billion. The figures confirm that states and local governments collectively receive the larger share of VAT revenue, while the Federal Government’s share is comparatively smaller.
The October FAAC meeting was chaired by the Accountant-General of the Federation, Dr. Shamseldeen Babatunde Ogunjimi. The communiqué was issued after deliberations that reviewed revenue performance across the major collection channels. The committee noted that while petroleum-related taxes, royalties, import duties, CET levies, and excise duties increased significantly, receipts from Companies Income Tax, Capital Gains Tax, Stamp Duties, VAT, mineral royalties, gas-flaring penalties, gas-flaring fees, and miscellaneous oil revenue declined considerably. This mixed performance underscores the uneven nature of Nigeria’s revenue recovery. Oil-related income can rebound quickly when production and export conditions improve, but non-oil revenue streams remain fragile and vulnerable to structural weaknesses in tax administration, compliance, and economic activity.
For state governments, the October allocation offers limited relief. Many states have struggled to meet salary obligations, pension payments, and capital expenditure targets since the sharp drop in September allocations. The N90 billion increase is welcome but modest, and the fact that the October figure remains nearly 20 per cent below the August peak means that states are still operating in a constrained fiscal environment. Local government councils, which received N560.660 billion, face similar pressures, particularly in rural areas where internally generated revenue is minimal and dependence on federal allocations is almost total.
The rebound in oil revenue is a reminder of Nigeria’s continued reliance on petroleum-derived income, despite years of rhetoric about diversification. Petroleum Profit Tax, Hydrocarbon Tax, and royalties are directly tied to crude oil production, export volumes, and global price movements. When those variables improve, FAAC allocations rise. When they deteriorate, as they did in September, allocations fall sharply, forcing states to adjust budgets mid-year and postpone or cancel planned projects. The volatility is a structural feature of Nigeria’s fiscal architecture, and it remains unresolved.
The October allocation will be scrutinised not only for its size but for what it says about the trajectory of federal revenues in the final quarter of 2026. If oil receipts continue to recover and VAT collections stabilise, FAAC distributions could edge higher in November and December. If, however, the September VAT decline persists or oil revenues prove uneven, states and local governments may face another difficult budget cycle. For now, the N2.428 trillion payout represents a pause in the fiscal turbulence that has marked much of the year, but it is not yet a turnaround.
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