Toba Owojaiye reporting
Abuja, Nigeria
The Nigerian federal government has unveiled a groundbreaking plan to significantly reduce its share of funds from the Federation Account Allocation Committee (FAAC), reallocating a greater portion to states and local governments.
In a statement made on Sunday, the Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr. Taiwo Oyedele, shared details of the proposal on X (formerly Twitter). The new arrangement would allocate just 10% of FAAC revenues to the federal government, while states and local governments would receive the remaining 90%.
This represents a major departure from the current distribution formula, where the federal government takes 52.68%, states receive 26.72%, and local governments are allocated 20.60%.
According to Oyedele, this reform is aimed at empowering sub-national governments and enhancing their fiscal autonomy. A key feature of the proposal is the introduction of a clause ensuring that 60% of the funds allocated to states and local governments are derived based on the principle of derivation. This would result in higher revenues for regions generating the most income.
“These changes are part of a broader initiative to overhaul Nigeria’s tax system, eliminate inefficiencies, and centralize tax collection,” Oyedele said. The federal government is making this concession to gain the cooperation of states in establishing a unified and more effective tax collection system.
The proposed changes are being touted as a landmark step towards fiscal federalism, granting sub-national governments greater control over their revenues. Oyedele emphasized that the new system would be carefully monitored to ensure it meets its objectives, and discussions with key stakeholders, including state and local governments, are ongoing.
This proposed shift marks a milestone in Nigeria’s fiscal policy, aiming to enhance state and local government autonomy while centralizing tax collection under a more efficient system. The federal government’s bold move to reduce its share to 10% could alter the dynamics of fiscal federalism in the country, though the reaction from public and state officials remains to be seen.
