Oyedele tasks states on economic development, prudent use of FAAC allocations

The Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr. Taiwo Oyedele, has urged state governments to do more in driving economic development and improving the welfare of their citizens, given the significant increase in allocations from the Federation Account Allocation Committee (FAAC).

Oyedele made this known on Tuesday in Abuja during the launch of BudgIT’s 2025 State of States Report.

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He noted that while some of the reforms introduced by President Bola Tinubu’s administration may have caused hardship, they have helped to stabilise and strengthen the economy over the past two years.

According to him, “Since May 2023, Nigeria has been undergoing seismic economic shifts: the removal of fuel subsidy, naira floatation, the attendant rise in inflation peaking at almost 35% before moderating, and a bold tax reform, among others.

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“These measures combined to double FAAC transfers – from ₦5.4 trillion in 2023 to ₦11.4 trillion in 2024. While some of the reforms have come with pains, the counterfactual outcomes i.e. without the reforms would have been a total economic collapse. These reforms halted the economic decline, stabilised the economy, and now beginning to stimulate growth structurally to ensure sustainability.”

He emphasised that the increased funds from the federal allocation should trickle down to the grassroots, particularly in improving education, healthcare, and other sectors that directly impact citizens.

“States are receiving more money than ever before. But there is a paradox: while governments have more naira, ordinary Nigerians have less disposable income in their pockets. It is a sobering reminder that fiscal abundance does not automatically translate into social prosperity.

“We must be intentional in translating positive macro results into meaningful micro outcomes for the people,” he said.

Citing findings from the State of States Report, Oyedele highlighted the growing dependence of many states on federal allocations despite rising revenues.

“The report shows that 21 states now rely on FAAC for at least 70% of their revenues, a higher number than the year before. In other words, FAAC dependency has deepened. But there are bright spots. Enugu grew its internally generated revenue by 381%, Bayelsa by 174%, Abia by 129%. Lagos, Ogun, Kwara, Anambra, and Edo continue to stand out for relative resilience.

“The real test of progress is whether states can turn the current revenue windfalls into sustainable fiscal space and utilise their resources judiciously to deliver shared prosperity,” he added.

Oyedele also spoke on the benefits of the recently introduced tax reforms, noting that they present a unique opportunity for states to expand their fiscal space and improve service delivery.

“The new tax reform laws provide a unique opportunity for states with increased allocation from the VAT pool, full assignment of electronic money transfer levy to states, and tax exemptions for state government bonds to lower borrowing costs, and measures to build capacity and close existing tax gaps,” he stated.

He called on state governments to make judicious use of the increased allocations to foster inclusive growth and ensure that fiscal gains at the national level are reflected in the living standards of citizens.

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