States governments under the Federal Account Allocation Committee (FAAC) Postmortem Sub-Committee have expressed concern on the growing scale of deductions from federation revenues, including power-related subsidy obligations, debt write-offs, and operational costs deducted at source.

The concern was raised in a Communique issued at the end of a 3-day retreat in Enugu State.

The committee said these practices were considered inconsistent with transparency, budgetary discipline, and constitutional intent.

It would be recalled that the federal government had proposed a N3.6tn deduction from the Federation Account to fund electricity subsidies in 2026, 2027, and 2028, a move designed to distribute the financial burden across federal, state, and local governments.

The deduction proposal, detailed in the Medium-Term Expenditure Framework Fiscal Strategy Paper for 2026–2028 reflects a strategic shift toward distributing the financial burden of the power sector across all tiers of government, amid growing concerns over unsustainable debts and systemic inefficiencies.

The communique which was contained in the February 2026 FAAC documents said the members unanimously observed that persistent revenue leakages, opaque deductions, institutional inefficiencies, and weak oversight continue to erode distributable revenues:

The participants while acknowledging that the Petroleum Industry Act (PIA) 2021 offers opportunities for improved governance and clarity in the oil and gas sector, however, raised serious concerns on the transfer of Joint Venture assets to the Nigeria National Petroleum Company (NNPC) Limited, management fees, Production Sharing Contract (PSC) profit oil administration, and the Frontier Exploration Fund.

They said these developments were observed to have materially reduced inflows into the Federation Account and weakened oversight.

The Retreat emphasised that transparency, accountability. and oversight are indispensable to closing revenue leakages.

They also expressed grave concern over crude oil-backed borrowing arrangements and opaque crude-for-product swaps, including Project Gazelle and the Direct Sale Direct Purchase (DSDP) scheme.

“It was agreed that such arrangements mortgage future federation revenues and should be subjected to strict transparency, legislative oversight, and Faac approvals; and revenue allocation and devolution of responsibilities.”

The communique recommended that all federation revenues must be remitted in gross into the Federation Account before any deductions in strict compliance with Section 162 of the 1999 Constitution of the Federal Republic of Nigeria (as amended).

“A unified, real-time revenue data architecture accessible to FAAC should be established, supported by periodic independent reconciliations involving The Revenue Mobilization Allocation and Fiscal Commission (RMAFC), the Central Bank of Nigeria, and relevant agencies. The RMAFC should organize a Stakeholders engagement to review certain sections of the PIA not favourable to the Federation Account. Cost of collection arrangements should be linked to efficiency and performance benchmarks, with strict caps on operational and capital expenditures by revenue-generating agencies. All crude oil-backed borrowing arrangements should be subjected to legislative approval, full disclosure, and independent audit. Existing arrangements should be reviewed, with forensic audits conducted to restore confidence and protect future Federation revenues. RMAFC should intensify engagement with NNPC Limited to obtain full documentation on joint venture asset transfers, compute net revenues due to the Federation, and pursue appropriate recovery actions where necessary.” (Daily Trust)