June 28 (THEWILL) — Nigeria’s nine oil-producing states received a combined N1.58 trillion from the statutory 13 percent derivation fund between June 2025 and June 2026, highlighting how currency depreciation and elevated oil revenues have dramatically expanded sub-national finances despite only modest gains in crude oil production.
An analysis of Federation Account Allocation Committee (FAAC) disbursement records shows that the derivation pool distributed to oil-producing states reached approximately N1.587 trillion over the twelve-month period. The figure underscores the extent to which oil-dependent states have benefited from the post-reform fiscal environment.
The 13 percent derivation fund is a constitutional allocation granted to states that produce crude oil and gas. It is paid from revenues generated from mineral resources before distributions are made from the Federation Account.
The windfall came amid a broader surge in federally distributed revenues. Between January and May 2026 alone, the three tiers of government shared about N10.45 trillion from the Federation Account, compared to N8.30 trillion during the corresponding period of 2025, representing an increase of 25.85 percent.
A review of monthly FAAC records shows that derivation payments remained consistently elevated throughout the period. Allocations climbed from N120.76 billion in July 2025, based on June earnings, to a twelve-month peak of N188.13 billion shared at the June 2026 FAAC meeting.
The largest monthly derivation pool was recorded in May 2026 earnings shared in June, while the lowest was N96.08 billion distributed in January 2026.
Delta State remained the largest beneficiary throughout the period, accounting for roughly 30 per cent of total derivation allocations, followed by Bayelsa, Akwa Ibom and Rivers states.
However, an examination of upstream petroleum data suggests that the sharp increase in derivation receipts was not primarily driven by a production boom.
Data from the Nigerian Upstream Petroleum Regulatory Commission showed that Nigeria’s crude oil production largely fluctuated between 1.35 million and 1.53 million barrels per day during the review period. Although production improved, compared to some previous years, the increase was not significant enough to explain the scale of growth in derivation allocations.
Instead, the major driver appears to have been the exchange-rate effect created by the naira’s depreciation following foreign-exchange reforms.
With crude oil revenues earned in United States dollars, every dollar converted into the Federation Account translated into substantially higher naira proceeds as exchange rates moved from below N1,000 per dollar before the reforms to levels above N1,450 per dollar during much of the review period.
This exchange-rate translation effect significantly inflated distributable revenues even when oil production volumes remained relatively stable.
Evidence of this mechanism can be seen in several FAAC distributions where exchange gains became a major contributor to distributable revenue.
For example, despite softer statutory revenue performance in September 2025, FAAC distributed a derivation pool of N134.96 billion after incorporating substantial exchange-rate gains into the revenue-sharing framework.
The trend suggests that the recent boom in derivation allocations represents more of a currency-driven fiscal windfall than an industrial expansion in oil production.
The development has strengthened the finances of oil-producing states at a time when many sub-national governments are grappling with rising wage bills, infrastructure deficits and increasing debt-service obligations.
Yet the surge in allocations raises a broader question about whether higher revenues are translating into stronger economic attractiveness.
Ogochukwu Onwaeze is a writer specializing in business and economic journalism. At THEWILL News Media, she translates market trends, financial developments, and policy shifts into clear and engaging stories.
