FAAC Lifeline: 33 Nigerian States Cannot Survive Without Federal Allocations — Data & Analysis 2025

Executive Summary: The Growing Fiscal Dependence Crisis

Nigeria’s subnational fiscal system is facing a structural imbalance. Data from BudgIT’s 2025 “State of States” report, cross-verified with Nairametrics, TheCable, and Vanguard, shows that 33 out of 36 states cannot meet recurrent expenditures without FAAC allocations. Only Lagos, Rivers, and Enugu exhibit sufficient internally generated revenue (IGR) to reduce dependence meaningfully.

Monthly FAAC disbursements — funded primarily by oil revenue, VAT, and corporate taxes — have become the lifeline for the overwhelming majority of states. Without these transfers, most states would struggle to pay salaries, pensions, and maintain essential services.

This article provides a deep dive into FAAC dependency, examines the structural drivers of fiscal fragility, presents state-by-state analytics, and identifies pathways for revenue autonomy.

FAAC Dependency: What the Data Really Shows

FAAC, established as the federal mechanism for revenue allocation, is intended to support states while encouraging internal revenue mobilization. However, 2025 data reveals disproportionate dependence:

• 32 states relied on FAAC for ≥55% of total revenue in 2023.

• 14 states were dependent on FAAC for ≥70% of total revenue in 2023.

• Average IGR as a share of total revenue declined to 20.27% in 2024, compared to 25.27% in 2023.

• Only Lagos and Rivers consistently cover operating costs with IGR alone.

This data confirms that most Nigerian states cannot function independently, highlighting the need for urgent fiscal reforms.

State-by-State Breakdown: Winners and Strugglers

Top Fiscal Performers

Lagos State:

• Ten-year average IGR: N541.35bn

• Covers salaries, pensions, and operating costs without relying on FAAC

• Revenue streams include property tax, personal income tax, and business levies

• Digital tax systems ensure efficient collection and minimal leakage

Rivers State:

• IGR covers ~121% of operating costs

• Industrial and oil base supports robust revenue

• Digitized revenue collection improves compliance

Enugu State:

• Emerging as a non-oil leader in revenue mobilization

• BudgIT 2025 Index A score: 0.68

• Shows potential for reduced FAAC dependency through disciplined taxation

Most FAAC-Dependent States

Bayelsa: 92.17% FAAC dependency — limited revenue diversification, high overheads
Akwa Ibom: 86.3% FAAC dependency — weak IGR mobilization
Delta: 83.9% FAAC dependency — resource wealth does not translate into fiscal autonomy
Taraba: 81.9% FAAC dependency — agricultural economy and low IGR
Niger: 80.2% FAAC dependency — structural revenue limitations
Benue: 79.9% FAAC dependency — administrative bottlenecks and low collection
Anambra: 76.9% FAAC dependency — ongoing IGR reform, still FAAC-reliant

FAAC Dependence in Nigerian States

FAAC allocations remain the backbone of state revenues, especially for states with limited IGR. The following table summarizes all 36 states, showing their 2024 FAAC dependency and internal revenue status:

Note: Data sourced from BudgIT 2025, NBS, and TheCable.

Analysis:

• 33 states depend heavily on FAAC for 55% or more of revenue.

• Only Lagos, Rivers, and Enugu demonstrate high fiscal autonomy.

• Many states show very low autonomy, highlighting systemic FAAC dependence.

State Variability and Fiscal Implications

BudgIT 2025 reveals wide disparities:

• IGR ranges from N541bn in Lagos to single-digit billions in Adamawa, Gombe, Taraba, Kebbi, and Yobe

• Personnel and overhead consume 50–60% of recurrent budgets

• Oil-producing states can still be FAAC-dependent if IGR systems are weak

• Non-oil states face structural constraints: poor tax enforcement, limited digital infrastructure, low economic diversification

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Understanding the Drivers of FAAC Dependency

1. Weak IGR Base

   • Fragmented tax systems

   • Non-digitized collection

   • Low compliance

2. High Operating Costs

   • Salaries and pensions dominate spending

   • Many states spend >60% of recurrent budget on personnel

3. Economic Structure

   • Non-diversified economies: agriculture, mining, or limited services

   • Oil-dependent states still FAAC-reliant without strong revenue enforcement

4. External Shock Vulnerability

   • Oil price volatility and federal revenue changes impact dependent states

5. Weak Reform Incentives

   • Regular FAAC inflows reduce urgency for IGR improvement and expenditure discipline

Reference: BudgIT 2025, NBS, DMO

Lessons from Fiscal Outliers: Lagos & Rivers

Lagos and Rivers demonstrate that fiscal autonomy is achievable:

• Diversified Revenue Streams: Personal, property, and business taxes; service fees

• Digital Taxation Systems: Efficient collection, reduced leakages

• Expenditure Discipline: Align salaries/pensions with predictable IGR

• Economic Investment: Industrialization, energy infrastructure, SME support

The Hidden Costs of Fiscal Fragility

• Reduced Development Spending: Limited investment in health, education, infrastructure

• Debt Accumulation: States borrow to cover deficits; 2023 total state debt ~N10.01 trillion

• Regional Inequality: Divergence between high-IGR and FAAC-dependent states

• Weak Reform Incentives: Regular transfers reduce urgency for revenue mobilization

Reference: NBS, BudgIT 2025

Policy Pathways to Fiscal Autonomy

1. Revenue Collection Reform

   • Digitization, harmonization, enforcement, broaden tax base

2. Expenditure Rationalization

   • Align recurrent spending with realistic IGR

   • Cut non-essential overheads

3. Diversification Strategies

   • Promote SMEs, tourism, agribusiness, industrial projects

   • Encourage public-private partnerships

4. Federal-State Reform

   • Performance-based allocations

   • Incentivize states achieving IGR targets

Summary Table – Autonomy Levels vs FAAC Dependence:

Reference: BudgIT policy briefs, DMO reports

Economic and Policy Implications

• Macroeconomic Vulnerability: States without IGR buffers face high exposure to shocks

• Governance Risks: Over-reliance on FAAC reduces accountability pressures

• Investment Risk: Investors prefer states with fiscal stability

• Inequality: Fiscal dependence exacerbates regional economic divergence

Conclusion: Beyond FAAC Dependence

BudgIT 2025 confirms 33 states cannot meet obligations without FAAC, masking weaknesses in IGR systems, fiscal discipline, and economic diversification. Only Lagos, Rivers, and Enugu demonstrate resilience.

The path forward requires strategic revenue reform, expenditure rationalization, economic diversification, and federal-state fiscal restructuring. Without these reforms, FAAC dependence remains a structural vulnerability, limiting development and perpetuating fiscal fragility.

References

1. BudgIT Foundation. State of States Report 2025. https://budgit.org

2. Nairametrics. “14 States Got 70% of Total Revenue from FAAC Receipts in 2023.” https://nairametrics.com

3. TheCable. “28 States Depended on FAAC Allocation for 55% of Revenue in 2024.” https://www.thecable.ng

4. Vanguard News. “State of States 2025: Enugu Emerges Likeliest State to Survive Without FAAC Allocations – BudgIT.” https://www.vanguardngr.com

5. PrimeBusiness Africa. “Top 25 Nigerian States with High Dependence on FAAC Allocations.” https://www.primebusiness.africa

6. NBS, National Bureau of Statistics. “State Revenue Performance Reports 2023–2024.”