The handling of federal allocations by state governments has come under scrutiny from the Nigeria Labour Congress, opposition parties and economists as the 36 state governments got a combined allocation of N5.22tn in 2024.
Economists and relevant experts expressed contrasting views on the justification for the allocated funds.
This scrutiny comes as President Bola Tinubu on Wednesday emphasised the critical role of state governors in driving Nigeria’s development and prosperity, claiming that this accounts for why 65 per cent of federation accounts go to states.
Speaking during a New Year homage by the Nigeria Governors Forum at his Ikoyi residence, the President described their leadership at the subnational level as “central to achieving food security, economic prosperity and rapid national growth.”
This is just as the President expressed gratitude to the governors for their support and collaboration while highlighting key areas requiring joint effort for the nation’s progress.
Findings showed that statutory allocations from the Federal Account Allocation Committee to the three tiers of government increased by N4.99tn to N15.12tn within the 12 months of 2024.
The amount indicates an increase of 49.24 per cent from N10.14tn disbursed to meet their obligations in 2023.
An analysis of the monthly communique issued by the committee showed that the 36 state governments got the highest allocation of N5.22tn, representing 34.5 per cent of N15.14tn total allocation to the three tiers of government.
This was followed by the Local Government areas with N4.97tn and central government with a revenue allocation of N4.95tn.
When compared, the states got an increase of 45.5 per cent from N3.585tn in 2023, while allocation to the local government increased by 96 per cent and central government by 25.6 per cent.
But if added with the LG allocation of N4.95tn, the amount increases to N10.19tn, indicating 67.3 per cent of total allocation.
The Federation Account Allocation Committee disburses allocations from the revenues generated into the Federations Accounts, which comprise multiple accounts specific to an or a sector/ business type.
The bulk of the revenue shared at FAAC meetings by the federal, state, and local governments are earnings from oil exports, taxes, and other statutory allocations.
Under the current revenue-sharing formula, the Federal Government gets 52.68 per cent of the revenue, states 26.72 per cent, and local governments 20.60 per cent.
However, for Value Added Tax, while the Federal Government gets 15 per cent of distributed funds, states get 50 per cent, and the remaining 35 per cent goes to the local government councils.
The proposed tax bills concede 55 per cent allocation to state governments while maintaining 35 per cent to the local government councils, leaving the Federal Government with 10 per cent.
The fund, which is arguably the major source of revenue for most states, is to ensure development at different levels of government and also to enable the states and LGs to meet their obligations.
A breakdown of the state’s 2024 monthly allocation showed that N396.69bn was disbursed in January, N379.41bn in February, and N398.69 in March and April.
These states also got N403.4bn in May, N388.42bn in June, N461.97bn in July and N473.47bn in August.
In September, an allocation of N422.86bn was disbursed to the states, N453.72bn in October, N490.69bn in November and N549.79bn in December.