Distinguishing between Federal Government Revenue and the Federation Account
By Temitope Ajayi
Public debate on government finances in Nigeria is once again clouded by confusion, little knowledge, and deliberate misrepresentation.
At the centre of the current controversy is a misunderstanding of the distinction between total revenue generated by government agencies and the portion that actually belongs to the federal government.
The confusion has been amplified by commentators who should know better and by a media ecosystem increasingly driven by noise rather than nuance.
As a result, statements by President Bola Tinubu on revenue performance and remarks by the Minister of Finance and Coordinating Minister of the Economy, Mr Wale Edun, have been wrongly framed as contradictory, when in fact they address two entirely different fiscal realities.
There is a deliberate effort by some individuals to muddy the waters by feeding the public with misleading information. One wonders why anyone would take pleasure in unleashing such information warfare on the public.
Regrettably, it appears the mainstream media, which should help frame rational and meaningful public discourse, increasingly relies on social media for stories.
They appear more interested in amplifying popular sentiments, even when wrong or absurd, for clicks and views rather than clarity.
The situation is even worse on television and radio, where self-styled experts are given ample airtime to spread ignorance.
These individuals parade themselves as public affairs analysts, often lacking the requisite expertise.
Last September, President Tinubu said the federal government had achieved its non-oil revenue target for 2025 by August.
He made this statement during a meeting with members of the defunct Congress for Progressive Change (CPC) and The Buhari Organisation (TBO), led by former governor of Nasarawa State, Senator Tanko Al-Makura.
By August, the Nigeria Revenue Service had collected over ₦22 trillion in taxes, while the Nigeria Customs Service had generated over ₦5 trillion.
The NNPC also reported several trillions of naira in remittances to the government.
These figures did not even include receipts from other revenue-generating agencies such as the Nigerian Ports Authority (NPA), the Nigerian Maritime Administration and Safety Agency (NIMASA), the Nigerian Communications Commission (NCC), and others.
However, during a public hearing at the National Assembly late last year, Edun said the Federal Government could not fund its capital budget adequately because it did not have enough money.
Some analysts and opposition figures, due to their poor understanding of the minister’s statement, seized on it as a talking point to misinform Nigerians. In reality, President Tinubu was correct, and Minister Edun did not contradict him.
Here are the facts:
President Tinubu was right to say revenue targets were met, as revenue-generating agencies exceeded their 2025 targets. Meeting revenue targets does not mean a government has all the money it needs.
No government in the world, including the wealthiest nations, has all the money it needs. This is why most governments run deficits.
A deficit is the gap between revenue and expenditure, which is usually financed through borrowing and other non-revenue sources.
Nigeria’s situation is like that of a man who needs ₦10 million annually to meet his personal and family obligations but earns ₦3 million.
If he sets a target to increase his income to ₦6 million and succeeds, he has met his target but still falls short of his needs.
All revenues generated by agencies such as the Nigeria Revenue Service, NNPC, NIMASA, NPA, Customs, NCC, NMDPRA, and NUPRC are paid into the Federation Account.
The money in the Federation Account does not belong solely to the Federal Government.
It is a pool from which the federal government, state, and local governments receive their statutory allocations.
When Mr. Edun spoke about ₦10 trillion as Federal Government revenue in 2025, he was referring to the Federal Government’s share from the Federation Account— the actual money available for federal spending.
The money being spent by the 36 states, the FCT, and the 774 local governments is primarily derived from the Federation Account through monthly FAAC allocations, as stipulated by the 1999 Constitution (as amended).
Apart from Lagos State, Rivers State, the Federal Capital Territory and possibly two other states, over 90 per cent of the revenue of 32 states and the 774 local governments comes from their share of the Federation Account.
The internally generated revenue of many states and local governments, as reflected in their 2026 budget proposals, is less than 10 percent of their planned expenditure for the year.
It, therefore, the federally collected revenues into the federation account that the entire machinery of the three levels of government essentially run on.
It is very important that this distinction is made for a better public understanding of how our government is funded.
While it is the job of the opposition and civil society to criticise and hold the government accountable, the media must act as the buffer and guardrails in promoting honest and open public conversations.
The media as the watchdog and moral compass of the society should frame national debate in a way that the public is properly educated and enlightened.
A well-informed citizenry is essential to sustaining democracy and promoting good governance. Democracy is endangered when charlatans are given unhindered access to microphones to ventilate falsehoods and misrepresent facts.
*Ajayi is Senior Special Assistant to President Tinubu on Media and Publicity*
