Federal Allocation to States and Local Governments Projected to Increase by 109.74% to N14.04tn in 2024
The Federal Government’s revenue projections in its Revised 2024 – 2026 Medium-Term Fiscal Framework indicate that federal allocation to states and local government areas in Nigeria may increase by 109.74% to N14.04tn in 2024. This projection is based on anticipated growth in the Federation Account’s revenue, driven by exchange rate effects, higher oil production, and the removal of subsidy.
- Projected Increase in Federal Allocation:
- The Federal Government’s revenue projections suggest a significant increase in federal allocation to states and local governments, rising from the projected N6.69tn in 2023 to N14.04tn in 2024. This represents a growth rate of 109.74%.
- Expected Rise in Federation Account Revenue:
- The revenue available in the Federation Account is anticipated to surge by 124.43% to N26.61tn in 2024 from N11.86tn in 2023. Factors contributing to this projection include exchange rate effects, higher oil production expectations, and the removal of subsidy.
- Current Status of Revenue Disbursement:
- In 2023 (January to September), the revenue available in the Federation Account amounted to N7.48tn. States and local governments received N2.00tn and N1.54tn, respectively, during this period.
- Government’s Revenue Enhancement Initiatives:
- President Bola Tinubu, during the presentation of the 2024 budget, highlighted ongoing efforts to review tax and fiscal policies. The government aims to increase the ratio of revenue to GDP from less than 10% to 18% within the administration’s term, focusing on effective implementation of key public financial management reforms.
- Challenges and Fiscal Viability:
- The Minister of Finance and Budget Planning, Abubakar Bagudu, emphasized that revenue generation remains a major fiscal constraint for the country’s fiscal viability. The government is reviewing current tax and fiscal policies to enhance revenue generation.
- Improved Allocation Post-Subsidy Removal:
- The Minister of Finance, Mr. Wale Edun, noted that allocation to states has improved from an average of N650bn monthly before subsidy removal to over N1tn monthly in the last four months. Economic reforms, including subsidy removal, fiscal, and monetary policies, are contributing to improved revenue inflow.
Conclusion: The projected increase in federal allocation to states and local governments in 2024 is expected to have a substantial impact on subnational development. The growth in revenue is attributed to various economic factors and reforms, and the government’s focus on enhancing revenue generation through tax and fiscal policy reviews. This development aligns with efforts to promote fiscal balance, prudent management of government expenditure, and overall economic transformation.