FAAC Deductions Consume 41% of N84tn Revenue in Three Years, Shrinking Nigeria’s Shared Income

Nigeria’s rising federation revenue has come with a hidden cost. Although total earnings hit about N84tn over the past three years, a staggering 41 per cent was deducted at source before any distribution was made to the federal, state, and local governments, according to new analysis based on World Bank data.

Fiscal records show that gross revenue increased sharply from N17.08tn in 2023 to N29.45tn in 2024 and N37.44tn in 2025. However, deductions from the Federation Account also climbed steeply within the same period, rising from N6.22tn in 2023 to N14.93tn in 2025—bringing total deductions to N34.53tn over three years.

The World Bank, in its Nigeria Development Update titled “Nigeria’s Tomorrow Must Start Today: The Case for Early Childhood Development,” warned that these “first-line deductions” are quietly reducing the amount of money available for development across all tiers of government. It noted that some agencies now receive more funding directly than several Nigerian states, reducing fiscal space and transparency.

The data also shows that while revenue growth has been boosted by subsidy removal and foreign exchange reforms, deductions have increased even faster. These deductions largely go to ministries, departments, and agencies such as the Nigerian Upstream Petroleum Regulatory Commission, Customs, and NNPCL, alongside refunds and cost-of-collection charges.

Experts warn the trend is worsening Nigeria’s fiscal strain, especially as public debt climbs and capital spending continues to fall. With capital expenditure dropping to N4.5tn in 2025 and debt servicing rising, analysts argue that the structure of revenue deductions is limiting investments in infrastructure, health, and education, despite higher overall earnings.