Federation Account swells to record N4.36 trillion amid subsidy removal, tax reforms
The Federal Government, 36 states, and 774 local government councils have shared a historic N3.007 trillion in federation revenue for July 2026, marking a staggering N658 billion increase from the previous month as Nigeria’s fiscal reforms continue to yield dividends.
The Federation Account Allocation Committee (FAAC) approved the disbursement at its August meeting in Owerri, Imo State, with gross statutory revenue climbing to N4.359 trillion – a 17.8% surge from June’s N3.700 trillion.
Oil, Non-Oil Taxes Drive Revenue Surge
The remarkable growth was fueled by improved collections across multiple revenue streams, including Petroleum Profit Tax, Hydrocarbon Tax, Companies Income Tax, Capital Gains Tax, Stamp Duties, petroleum royalties, and mineral royalties.
“The month’s figures point to a strengthening underlying revenue base,” stated Bawa Mokwa, Director of Press and Public Relations at the Office of the Accountant-General of the Federation.
However, VAT revenue experienced a slight dip of N5.778 billion (0.7%) to N793.968 billion, while import duties and other levies also recorded marginal declines.
Reform Dividends Materialize
The revenue windfall comes on the heels of major fiscal policy shifts, including:
· Petrol subsidy removal
· Foreign exchange market unification
· Expanded tax base initiatives
· Implementation of the Nigeria Tax Act 2025
New VAT Sharing Formula Takes Effect
The August meeting marked the first full implementation of the revised VAT distribution framework under the Nigeria Tax Act 2025, which took effect January 1, 2026. The new formula increases states’ share from 50% to 55%, while the federal government’s portion drops from 15% to 10%.
Crucially, 30% of states’ VAT pool will now be distributed based on place of consumption rather than company headquarters location – incentivizing states to attract businesses and expand their economic base.
Beyond Sharing: Call for Productive Investment
FAAC members emphasized that the challenge now is converting revenue growth into tangible development.
“The FAAC session set out the scale of the recent revenue windfall and called for deliberate reform to convert it into durable fiscal strength rather than a temporary gain,” the communiqué read.
States were urged to focus on six key areas:
1. Improving internally generated revenue
2. Commercializing public assets
3. Expanding economic activity
4. Attracting private capital
5. Investing in human capital
6. Enhancing transparency in public finance
Sustaining the Momentum
The committee warned that sustaining the revenue gains depends on continued collection and remittance discipline across Ministries, Departments, and Agencies.
“Gross FAAC have risen significantly over the past three years driven by subsidy removal, exchange-rate unification and tax reform,” the statement noted, calling for diversification beyond crude oil revenues with a focus on solid minerals and other non-oil royalty streams.
