July 28, (THEWILL) — Total disbursements from the Federation Account Allocation Committee (FAAC) to the 774 local government areas (LGAs) in Nigeria’s 36 states increased by N1.32 trillion to reach N2.50 trillion (year-on-year) as of June 30,2025.
This constitutes a 111.81 percent increase from N1.18 trillion recorded in the corresponding period of the previous year, according to data by the National Bureau of Statistics.
Further analysis of the reports revealed that the highest allocation in H1 2025 was recorded in June. The LGAs received a total of N444.85 billion from FAAC revenue of N1.81 trillion in the month, shared by the three tiers of government – also the highest during the period.
The least allocation to the LGAs was in March 2025 when they shared N387 billion from the least FAAC revenue of N1.57 trillion for the three tiers of government.
Also affected by the robust FAAC expansion was the Electronic Money Transfer Levy (EMTL) which rose by N51.58 billion to N149.56 billion as of June 2025, against N98.98 billion achieved in the equivalent period of 2023, which represents an increase of 51.64 percent.
The EMTL is levied on transactions conducted via platforms such as mobile money, internet banking, and other electronic payment methods.
It applies to all electronic transfers of funds placed in a Nigerian-licensed bank or financial institution. The Levy is imposed as a singular and one-off charge of ₦50 on electronic transfers or electronic receipts of money in the sum of ₦10,000 or more. Transfers under ₦10,000 and between accounts within the same financial institution are outside of the scope of EMTL.
The federal government in August 2024 expanded the scope of the EMTL to include fintech companies. This move aims to capture revenue from the booming fintech sector, which has seen significant growth in transaction values.
Previously, the EMTL primarily targeted traditional banking institutions. The inclusion of fintechs, which have seen a remarkable 2,507.94% increase in transaction values since 2020, is part of the government’s strategy to regulate and monetise this growing sector.
The process of collecting and remitting the funds involves financial institutions collecting the Levy on each qualifying electronic transfer and remission is expected to be made to the Federal Inland Revenue Service (FIRS) within the timeframe stipulated.
The Finance Act, 2022 which gave birth to the levy stipulates that revenue accruing by the operation of EMTL shall be distributed to the three tiers of government on the basis of derivation with the federal government receiving 15 percent, states 50 percent and the local governments 35 percent of the EMTL realised.
The expansion in EMTL revenue underscores the contribution or the banks and the telecom firms as enablers of the scheme. The strategic systems upgrade by the banks which gained increased momentum in 2024 has positioned the banks for a intense competition that would emerge at the end of the ongoing recapitalisation exercise.
On the face value, the federal, state and local governments are harvesting an incredible volume of FAAC revenue which is largely attributed to the removal of fuel subsidy by the federal government in May 2023.
However, a closer look at the state of the nation’s affairs would reveal that the source of the ‘voluminous’ naira is the massive depreciation of the local currency from N472/US$1 it traded at the forex window prior to the floating of the naira on June 14, 2023.
This triggered a roller-coaster trend for the naira which suffered intense volatility that the monetary policy authorities almost lost control of. As of Friday, July 25, 2024, the naira exchanged N1,540/US$1 at the official window. It thus becomes obvious that the three tiers of government are carrying a huge volume of naira with less value, in real terms.
Price pressures have left millions of Nigerians grappling with the worst cost of living crisis in decades as they struggle to meet their basic needs.
Despite the increase in local government FAAC allocations, the entities have been battling to gain autonomy and liberate from the apron-string of the domineering state governments which appropriate the LG funds without restraint.
Despite a Supreme Court decision granting financial autonomy to Nigeria’s local governments over a year ago, implementation has been slow and inconsistent, with many states still not fully adhering to the ruling.
The decision aimed to empower local governments by allowing them to manage their finances, collect revenue, and allocate resources independently from state governments. However, some state governments continue to interfere with local council affairs, undermining the intended autonomy.
The Supreme Court affirmed the financial autonomy of local governments, declaring that they should manage their funds directly, without state government interference.
The ruling also addressed the legality of caretaker committees and interim councils, stating that they should not receive allocations from the federation account.
The court’s interpretation of Section 162 of the Constitution essentially stripped governors of their control over local government funds and this was expected to bring a spate of relief to the struggling local government authorities.
However, some state governments continue to resist the implementation of the ruling, potentially due to concerns about losing control over local government resources and decision-making.
At the moment, there appears to be a lack of effective mechanisms to ensure that states comply with the Supreme Court’s decision making the exercise a mere talk-show. Moreover, achieving true autonomy for local governments also requires constitutional amendments, which have faced significant hurdles in the past, especially among the state governments.
Without financial and administrative autonomy, local governments’ struggle to effectively address the needs of their communities and promote grassroots development amounts to a wild goose chase, as the continued interference from state governments weakens local governments’ capacity for effective governance and accountability.
The slow pace of implementation and the ongoing resistance from some state governments have led to public frustration and disappointment as the increased FAAC allocation has seen no impact on the development that the local governments are expected to bring.
Analysts insist that there is a need for stronger mechanisms to enforce the Supreme Court’s decision and ensure that states comply with the ruling, stressing that progress on constitutional amendments related to local government autonomy is crucial for achieving lasting change.
Raising public awareness about the importance of local government autonomy and advocating for its full implementation is essential, especially among the National Union of Local Government Employees (NULGE). The workers argue that the huge revenue being allocated to the LGAs through FAAC yields nothing but setbacks and failed expectations in economic development.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
