Nigeria’s federation revenues have surged to N84 trillion over the past three years, but a staggering 41% of this amount was siphoned off through pre-distribution deductions, drastically reducing the funds available for sharing among the federal, state, and local governments, according to the World Bank’s latest Nigeria Development Update.
The report, titled “Nigeria’s Tomorrow Must Start Today: The Case for Early Childhood Development,” reveals that total gross revenues climbed from N17.08 trillion in 2023 to N29.45 trillion in 2024 and N37.44 trillion in 2025, bringing the cumulative total to N83.97 trillion.
However, deductions from the Federation Account ballooned even faster — from N6.22 trillion in 2023 to N13.38 trillion in 2024 and N14.93 trillion in 2025 — amounting to a combined N34.53 trillion over the three-year period. This means that for every naira generated, roughly 41 kobo never reached the three tiers of government.
The deductions, which include statutory transfers to various government agencies, consumed 36.4% of revenue in 2023, spiked to 45.4% in 2024, and stood at 39.9% in 2025. While overall revenues grew by 72.4% between 2023 and 2024, deductions increased by a staggering 115.1% over the same period.
The World Bank warned that this growing wave of first-line charges is quietly eroding the fiscal space available for development, even as the country records improved revenue performance following the removal of the petrol subsidy and foreign exchange reforms.
A breakdown shows that agencies such as the Nigerian Upstream Petroleum Regulatory Commission, Nigerian Midstream and Downstream Petroleum Regulatory Authority, Nigeria Customs Service, and the Nigerian National Petroleum Company Limited have been among the biggest beneficiaries. In some cases, individual agencies now receive more funding than several Nigerian states combined.
The development comes at a time when Nigeria’s public debt has ballooned to N159.2 trillion ($110.3 billion) as of December 2025, raising fresh concerns about debt sustainability and the government’s ability to service obligations while meeting critical development needs.
The World Bank noted that although revenue has improved, the structure of deductions means that much of the gain is automatically diverted before it reaches the Federation Account for sharing. This has limited the impact of recent economic reforms on the resources available to states and local governments, which rely heavily on FAAC allocations for basic services and infrastructure.
The report adds to growing concerns that without a comprehensive review of the deduction framework, the benefits of higher revenue generation may continue to bypass the tiers of government responsible for delivering services to ordinary Nigerians.
As fiscal pressures mount and the 2026 budget debates intensify, stakeholders are calling for greater transparency and a re-evaluation of how federation revenues are allocated and deducted at source. The current system, critics argue, risks undermining the very purpose of revenue generation — improving the lives of citizens across the country.
