N22.4tn FAAC Allocations Soared Liquidity in 2025 despite Fiscal Risks

The latest data from the Office of the Accountant General of the Federation show that FAAC disbursed a total of N22.44 trillion to the three tiers of government in 2025, marking a substantial expansion in public sector liquidity and fiscal capacity.

Allocations to the Federal Government, State Governments, and Local Governments rose strongly year on year, with increases of 55.73%, 42.21%, and 43.09% respectively.

Overall FAAC inflows grew by 44.26%, while 13% derivation payments increased at a more moderate pace of 14.15%, indicating that the broader revenue gains were not driven solely by oil-producing al- locations.

The expansion in FAAC allocations improved liquidity conditions across all tiers of government, providing support for public spending, salary payments, and infrastructure outlays.

At the same time, stronger inflows can encourage growth in recurrent expenditure, reinforcing the need for disciplined fiscal management and a sustained focus on capital efficiency.

Monthly disbursements showed a generally upward trend through most of the year, climbing from N1.70 trillion in January to a peak of N2.23 trillion in August before easing slightly toward year-end. The second half of the year was particularly supportive, reflecting stronger statutory in- flows and resilient tax collections.

The August peak was largely linked to elevated statutory revenues alongside stable VAT receipts, suggesting firmer fiscal momentum during that period.

By revenue source, the Statutory Account remained the dominant contributor, totalling N13.22 trillion in 2025, a sharp 141.8% increase from the prior year.

This reflects stronger federally collected revenues, supported by improved oil earnings, exchange rate adjustments, and better non-oil revenue performance. In contrast, exchange gains declined significantly to N699 billion, down 88.4% year on year, indicating a normalization from the unusually large currency-related windfalls recorded in 2024.

Non-oil revenue streams continued to gain traction. VAT collections rose to N7.97 trillion, up 30.6% year on year, supported by improved consumption activity and ongoing enhancements in tax administration.

EMTL receipts remained broadly stable at N452 billion, underscoring consistent contributions from telecom-related activity. The steady growth in VAT and other domestic taxes points to gradual progress in diversifying revenue sources away from volatile exchange-related gains.

Experts at Cowry Assets maintained that the improved FAAC disbursements in 2025 reflected strong fiscal inflows, improved tax performance, and reduced dependence on exchange rate windfalls.

Sustaining this trajectory will depend on continued structural reforms, stable energy revenues, and careful expenditure management as fiscal authorities navigate an evolving domestic and global environment.

The experts noted that in the coming months, government revenues are expected to strengthen further, supported by the mandatory fiscalisation of tax processes, the continued rollout of digital revenue administration systems, and efforts to broaden the tax base.