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FAAC Allocates N1.68 Trillion, Despite a N117.4 Billion Decrease in VAT Revenue for February 2025
At a meeting on Monday in Abuja, the Federation Accounts Allocation Committee (FAAC) decided to allocate N1.68 trillion for February 2025 to the federal, state and local governments despite the decrease in Value Added Tax (VAT) revenue. The allocation was agreed upon during the March meeting of the FAAC in Abuja, chaired by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun and attended by the newly appointed Accountant General of the Federation, Shamsedeen Ogunjimi.
FAAC decision to allocate N1.68 trillion for February 2025 was hit by a fall in VAT revenue of N117. 43 billion compared to January. The total collected VAT revenue was N771. 89 billion in January and N654. 46 billion in February, thereby making February the month of lower total distributable revenue. Related: Ministry of Finance FAAC N/A – Lower VAT Revenue The committee distributed N1. 68 trillion to the three tiers of government in February.
Total distributable revenue for February was broken down into a number of components: N827. 63 billion from statutory revenue; N609. 43 billion VAT revenue; N35. 17 billion EMTL; N28. 22 billion solid minerals revenue; an augmentation of N178 billion to cover the shortfalls; total available gross revenue for February was N2. 344 trillion, but deductions including collection costs (N89. 09 billion), transfers, interventions, refunds and savings (N577. 10 billion) reduced the net distributable amount.
Calculating the FAAC distribution due to the drop in VAT revenue, the Federal government received N569. 66 billion; state governments received N562. 20 billion and local government councils were given N410. 56 billion. Meanwhile oil producing states received N136. 04 billion as 13% derivation revenue from mineral resources.
Based on the sum of N827. 63 billion in statutory revenue, the federal government received N366. 26 billion, state governments received N185. 77 billion and local government councils received N143. 22 billion. Out of the respective sum was N132. 37 billion to the mineral producing states as derivation revenue.
Similar allocations were made for the delivery of VAT revenues to the government: the federal government received N91. 42 billion, state governments received N304. 72 billion and local government councils received N213. 30 billion.
FAAC data released Thursday shows a drop in VAT collections for February 2025, raising questions over the state of the Nigerian budget amid continuing economic woes. Experts say the falling VAT collection and lower consumer spending has been attributed to depressed economic activity. Other tax revenues such as Petroleum Profit Tax (PPT), Company Income Tax (CIT), excise duty and import duty have also fallen during the period.
At the same time, FAAC distributed an additional N1. 68 trillion to meet government’s needs for salaries, projects in infrastructure and basic services at all levels of government, a very timely package given a level playing field for Nigeria in its efforts to contribute to the growth and development of key infrastructure and social programs and meet fiscal sustainability challenges.
Minister Wale Edun emphasized the government’s commitment to improving revenue collection systems and reducing leakages during his remarks at the meeting. The inclusion of solid minerals revenue and EMTL earnings highlights efforts to diversify Nigeria’s income sources beyond oil dependency.
As the FAAC distribution continues to be indispensable for states and local governments that depend heavily on this kind of money (as they have little or no internal revenue generation), the ability of Nigeria to mitigate these fiscal challenges, as expressed by the FAAC reduction in VAT as at February 2025, will likely be one of the priorities for stabilizing federation account inflows moving forward.
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