By Jennete Ugo Anya
Nigeria’s public finances received an extraordinary boost in the third quarter of 2025 as total disbursements from the Federation Account Allocation Committee reached an unprecedented N6 trillion, the highest in the country’s history. The milestone, confirmed by the Nigerian Extractive Industries Transparency Initiative, reflects a sharp rise in federation account receipts, easing debt pressures on states and strengthening fiscal inflows across all tiers of government.
Yet beneath the headline figure lies a familiar tension. The gains were driven largely by oil-linked revenues at a time when global crude markets remain volatile, a reality that could quickly reverse the fiscal momentum if not carefully managed.
A Historic Quarter for Public Revenues
According to NEITI’s Quarterly Review for Q3 2025, released on January 14, 2026, the N6 trillion shared among the federal, state, and local governments includes statutory allocations as well as the 13 percent derivation payments to oil-producing states.
Compared with the same period in 2024, quarterly FAAC allocations in 2025 rose by 55.6 percent, effectively more than doubling allocations within two years. The distribution showed the federal government receiving N2.19 trillion, states N1.97 trillion, and local governments N1.45 trillion.
The scale of the disbursement underscores how improved inflows, supported by stronger oil receipts and exchange rate effects, have reshaped the revenue landscape in the short term.
What Drove the N6 Trillion Allocation
NEITI’s review shows that statutory revenues accounted for 62 percent of total shared receipts, while Value Added Tax contributed 34 percent. The Electronic Money Transfer Levy and augmentation from the non-oil excess revenue account each accounted for two percent.
For the 36 states, the allocation pool comprised statutory revenues, VAT, EMTL, and the Ecological Fund. In addition, states received a N100 billion augmentation from the non-oil excess revenue account, a boost that further lifted quarterly inflows.
The composition of the revenue mix highlights a modest but growing contribution from non-oil sources, even as oil remains the dominant driver of distributable revenues.
Winners, Laggards, and the Allocation Gap
A closer look at state-level allocations reveals sharp disparities. Lagos State emerged as the highest recipient, with N179.3 billion for the quarter, translating to an average monthly inflow of N59.76 billion. Kano followed with N79.2 billion, while Rivers State received N78.8 billion.
At the lower end of the scale, Nasarawa State received N42.5 billion, Ebonyi N42.9 billion, and Ekiti N43 billion. Nasarawa’s average monthly allocation stood at N14.1 billion, highlighting the wide fiscal gap between Nigeria’s largest commercial hub and its smaller subnational economies.
The difference between the highest and lowest state allocations reached N136.8 billion in the quarter. Notably, Lagos’ N179 billion intake was more than double the combined receipts of Kano and Rivers, underscoring the structural imbalances embedded in Nigeria’s fiscal federalism.
Derivation Revenue Reshapes the Rankings
Derivation payments once again played a decisive role in altering state rankings. Nine oil-producing states received a combined N424 billion as 13 percent derivation revenue in Q3 2025.
The impact was material. NEITI’s analysis shows that derivative states accounted for nearly half of gross FAAC allocations during the quarter. Among them, Delta State stood out, recording the highest gross revenue allocation at N180.68 billion.
Akwa Ibom, Bayelsa, Rivers, and Delta formed the leading cluster of oil-bearing states, reinforcing how resource geography continues to shape fiscal outcomes in Nigeria.
Debt Deductions Ease, but Pressures Remain
One of the more encouraging signals from the review was a reduction in debt-related deductions from state allocations. Total deductions for debt servicing and other obligations amounted to N225.89 billion, representing a 6.5 percent decline from the previous quarter.
The average debt service ratio across states stood at 9.4 percent, with individual ratios ranging from 1.5 percent to 26.8 percent. About one-third of states recorded debt service ratios below five percent, while more than two-thirds remained below ten percent.
However, the burden remains uneven. Ogun State topped the chart with a debt service ratio of 26.8 percent, closely followed by Lagos at 26.5 percent, while Cross River ranked third. These figures highlight persistent vulnerabilities among states with heavy debt obligations, even amid stronger revenue inflows.
Oil Market Signals Cloud the Outlook
Despite the strong Q3 performance, NEITI warned that early indicators for Q4 2025 point to potential headwinds. Average crude oil production declined from 1.64 million barrels per day in Q3 to 1.59 million barrels per day in the first month of Q4.
At the same time, oil prices softened while exchange rates edged higher compared with Q3 averages. If sustained, these trends could reduce foreign exchange-denominated inflows and compress distributable revenues in the final quarter of 2025.
This outlook reinforces a long-standing concern. Nigeria’s fiscal health remains closely tied to oil market dynamics, leaving public revenues exposed to external shocks.
Solid Minerals Still Absent from the Equation
The review also revealed a notable gap in Nigeria’s diversification narrative. Derivation revenue from the solid minerals sector was unavailable for distribution in Q3 2025 because it was negligible and insufficient for sharing among federation account beneficiaries.
The last recorded distribution from solid minerals occurred in August 2024. This underscores the slow pace of translating mining sector reforms into tangible fiscal returns, despite repeated policy commitments to diversify revenue sources beyond oil.
NEITI’s Call for Fiscal Discipline
Reacting to the report, NEITI’s Executive Secretary, Musa Sarkin Adar, welcomed the strong remittance performance and the easing of debt pressures on states. However, he cautioned that volatility in global oil markets and optimistic budget benchmarks could undermine fiscal sustainability if left unaddressed.
NEITI urged the publication of up-to-date balances and liabilities for key federation accounts, including the Non-oil Excess Account, Domestic Excess Crude Account, Stabilisation Fund, Ecology Fund, and other mineral resource-linked accounts. Such disclosures, the agency argued, should include clear explanatory notes on FAAC transactions, refunds, net-offs, and priority project entries to deepen transparency.
Stabilisation Buffers and Realistic Benchmarks
Beyond transparency, the review emphasised the need for consistent application of Appropriation Act benchmarks when determining monthly distributable revenues. NEITI recommended greater use of the Stabilisation Account to smooth monthly disbursements and the transfer of exchange gains into stabilisation buffers.
It also called on governments at all levels to strengthen Nigeria’s sovereign wealth and stabilisation capacity by committing to regular transfers into the Nigeria Sovereign Wealth Fund and related mechanisms, in line with fiscal responsibility frameworks.
At the budget level, NEITI advised adopting more conservative and achievable assumptions for crude oil production and prices. Realistic benchmarks, the agency argued, would reduce implementation gaps, contain deficits, and improve debt sustainability metrics.
Diversification as the Long-Term Answer
While the Q3 figures provide short-term relief, NEITI stressed that durable fiscal stability depends on accelerating revenue diversification. Priority areas include attracting investment into the mining sector, expediting legislation to modernise the Mineral and Mining Act, supporting reforms in the downstream petroleum sector, and fully implementing the Petroleum Industry Act to expand domestic refining and value addition.
The agency called on the Office of the Accountant General of the Federation, the Revenue Mobilisation Allocation and Fiscal Commission, FAAC, the National Economic Council, the National Assembly, and state governments to act on its recommendations.
A Windfall, Not a Free Pass
NEITI’s central message is clear. The Q3 2025 FAAC results are encouraging, but they represent an opportunity rather than a guarantee. Without disciplined fiscal management, stronger transparency, and effective stabilisation mechanisms, today’s windfalls could quickly give way to tomorrow’s shortfalls.
“The Q3 2025 FAAC results are encouraging, but windfalls must be managed with discipline,” Adar said. “Greater transparency, realistic budgeting, and stronger stabilisation mechanisms will ensure these resources deliver durable benefits for all Nigerians.”
In a fiscal system still anchored to commodity revenues, the record N6 trillion allocation stands as both an achievement and a warning. The numbers tell a story of recovery and relief, but also of unfinished reforms that will determine whether Nigeria can turn episodic windfalls into lasting fiscal resilience.
