By Caroline Ameh
For Nigeria’s 36 state governments, one of the clearest consequences of President Bola Ahmed Tinubu’s economic reforms is the dramatic increase in money flowing from the Federation Account. The change has altered the fiscal capacity of states and, with it, the expectations placed on governors to deliver better roads, schools, healthcare, security, water, jobs and other public services.
The shift is striking. In June 2023, shortly after Tinubu assumed office, state governments received N295.948 billion from the Federation Account, while oil-producing states received N47.478 billion in derivation revenue. Total distributable revenue to the three tiers of government was N907.054 billion.
By June 2026, states received N838.21 billion from the Federation Account, while oil-producing states received an additional N197.61 billion in derivation revenue. Total revenue shared among the federal government, states and local governments reached about N2.55 trillion. The basic allocation to states was therefore almost three times what states received in June 2023.
The May 2026 distribution further illustrates the scale of the opportunity. States received N759.141 billion from the distributable pool, while oil-producing states received N188.132 billion as derivation revenue. Total distributable revenue stood at N2.3 trillion.
The figures are not simply a record of higher transfers. They represent a significant change in the fiscal relationship between the federal government and the sub-national governments, and they raise a more demanding question: what are states doing with the additional money?
The Fiscal Effect Of Tinubu’s Reforms
The administration argues that subsidy removal, foreign-exchange reforms and stronger revenue mobilisation have improved fiscal sustainability and increased resources available to all three tiers of government. The wider reform story supports that argument, with stronger revenues accompanying a period of economic adjustment.
But higher nominal allocations do not automatically mean equivalent increases in purchasing power. Nigeria has experienced severe inflation since the reforms began. Construction materials, transport, food, salaries, medical supplies and other government expenses have become substantially more expensive.
Consequently, a state receiving substantially more naira today does not necessarily possess the same proportionate increase in real spending capacity. Even so, the scale of the increase changes the accountability equation.
Before the current administration, inadequate federal transfers were frequently cited by state governments as a major constraint on development. With allocations now considerably higher, that explanation carries less weight. The new challenge is fiscal conversion: turning revenue into visible public value.
A state receiving hundreds of billions of naira annually should be able to demonstrate measurable improvements in basic infrastructure and services. Roads should become more functional. Primary healthcare should improve. Schools should receive better facilities and learning resources. Water systems should become more reliable. Agricultural infrastructure should support production. Security interventions should create safer environments for communities and businesses.
The test is not simply how much money a governor receives. It is how much of that money reaches citizens.
More Money Does Not Automatically Mean More Development
The increase in Federation Account Allocation Committee (FAAC) receipts cannot by itself guarantee prosperity. A governor can receive substantially more money and still produce little improvement in citizens’ lives if additional resources are absorbed by recurrent expenditure, debt obligations, administrative costs or inefficient spending.
The greater danger is that a temporary revenue improvement could create the illusion of fiscal strength without building sustainable state economies.
The more productive option is to direct a meaningful proportion of additional revenue towards investments capable of expanding economic activity and future internally generated revenue. Agriculture and agro-processing, industrial clusters, transport infrastructure, tourism, digital infrastructure, housing, healthcare, education and skills development can create productive capacity beyond the immediate government budget. That would give FAAC receipts a multiplier effect.
The Citizen Remains The Real Scorecard
This sub-national fiscal opportunity must be understood within the wider economic record of the Tinubu administration. When he declared on May 29, 2023 that fuel subsidy was gone, petrol prices rose sharply, the naira weakened, transportation became more expensive and food prices climbed. For a government that came into office under the banner of Renewed Hope, the first months often felt more like renewed hardship.
Three years later, however, the reform story is more complicated.
Nigeria’s real gross domestic product (GDP) grew 3.89 percent year-on-year in Q1 2026, compared with 3.13 percent in Q1 2025, while the International Monetary Fund (IMF) projects 4.1 percent growth for 2026.
Yet GDP growth tells only part of the story. Inflation has fallen from its previous peak, but prices remain substantially higher than when Tinubu took office. Falling inflation does not mean falling prices; it means prices are rising more slowly.
That distinction matters politically because citizens experience government through the price of food, transport and rent, the condition of roads, the availability of electricity, the quality of public hospitals and schools, and the safety of their farms and communities.
The same contradiction can now be applied to the states. If state revenues have increased dramatically while citizens continue to experience deteriorating roads, weak public healthcare, poor schools, insecurity and inadequate basic services, the size of FAAC allocations becomes less impressive.
The 2027 Question
The fiscal gains therefore feed directly into the political question confronting Tinubu. The cost-of-living crisis remains his biggest vulnerability.
If reforms begin producing visibly better household incomes before February 2027, Tinubu can argue that Nigerians endured the difficult phase and are beginning to enjoy the benefits. If prices remain painfully high while wages lag behind, the opposition will have a simpler message.
Yet the same electoral test applies to governors. The federal government can argue that difficult reforms have strengthened the fiscal foundation of the federation, but state governments now carry a larger part of the burden of proof.
Our Preliminary Verdict
Three years into the Tinubu presidency, it would be intellectually dishonest to describe the administration as either a complete success or an outright failure. It has achieved genuine macroeconomic and structural reforms, but also imposed genuine economic pain.
The most consequential fiscal change for the states may be the expansion of FAAC receipts. The movement from N295.948 billion received by states in June 2023 to N838.21 billion in June 2026 is too substantial to be treated merely as a statistical improvement. It changes what citizens can reasonably demand from their governors.
The central question is no longer simply whether Nigeria’s states have enough money to govern. Increasingly, it is whether they are using the money effectively enough to change the lives of the people who provide the justification for government expenditure.
If higher allocations produce better infrastructure, stronger human capital, improved security, greater economic activity and better public services, citizens may eventually see the reforms as having created tangible benefits.
If additional revenue produces mainly larger budgets without corresponding improvements in living standards, the FAAC windfall will become another example of Nigeria’s long struggle to convert public revenue into broad-based development.
Ultimately, the Tinubu reform story will be judged not only in Abuja or in macroeconomic statistics, but in the states where federal revenue becomes roads, schools, hospitals, water, security and jobs.
For the states, the era of saying there is simply not enough money is becoming less convincing. The more difficult question now is what they do with what they have.
