The total federal allocation disbursed to Nigeria’s 774 local government areas in July 2024 increased by 19.5%. This was disclosed in the communique issued by the Federation Accounts Allocation Committee(FAAC).
The Supreme Court’s ruling in July mandates that local government allocations be directly deposited into their accounts. This change could increase the resources available for local governance and promote grassroots development.
However, the potential benefits may be delayed until the ruling is fully implemented.
FAAC Allocation is the monthly distribution of total revenue from the federation account between the federal, state, and local governments.
The FAAC allocation serves as an additional revenue source for state and local governments, complementing their internally generated funds.
These revenue streams support development across different levels of government in fulfilling their statutory responsibilities.
Despite the Supreme Court’s ruling in July requiring that local government allocations be directly deposited into their accounts, local governments have yet to receive direct FAAC funding from the federal government.
According to Finance Minister, Mr. Wale Edun, a practical impediment is delaying the immediate implementation of the court’s order.
The 774 local governments in Nigeria received over N2 trillion from the federation’s account revenue between January and July 2024.
Monthly allocations increased by 19.5% in July, from N287.7 billion in June to N343.7 billion, marking the highest amount since January 2024.
In July 2024, N1.358 trillion in Federation Accounts Revenue was distributed among the Federal Government, State Governments, and Local Government Councils.
The Federal Government received N431 billion, while the State Government received N473.5 billion.
The Local Government Councils received a total of N343.7 billion, and N109.816 billion (13% of mineral revenue) was distributed as derivation revenue to the oil-producing states.
Beyond these figures, there are ongoing concerns that the heavy reliance of states and local governments on federal allocations may hinder their ability to fully harness their internal revenue generation potential.
Each level of government has statutory duties and responsibilities within its jurisdiction, including the provision of social amenities, which require substantial financial resources.
Ideally, allocations from the federation account should supplement the internal resources of state governments. However, losses in internally generated revenue (IGR) and untapped revenue sources are common at both the state and local government levels.
A Dataphyte analysis of the 2022 State Internally Generated Revenue (IGR) reveals that a significant portion of state revenue comes from the federal government.
Between 2018 and 2022, allocations from the federal government consistently accounted for over 50 percent of the total revenue for states.
A key concern is that this dependence may persist at the local government level now that they will receive allocations directly, potentially stalling progress toward true fiscal independence and undermining the quality of service delivery.
To ensure that financial autonomy for Local Government Areas (LGAs) translates into genuine grassroots development, significant efforts must be made to enhance their revenue potential beyond FAAC allocations.
Additionally, existing ambiguities in the delineation of responsibilities between state and local governments should be carefully examined to facilitate comprehensive autonomy for local governance.