Nigeria’s federation revenues rose to ₦84 trillion over the past three years, but 41 per cent of these earnings was lost to pre-distribution deductions, significantly shrinking what is eventually shared among the three tiers of government, findings have revealed.
Latest fiscal data obtained from the World Bank’s Nigeria Development Update Tuesday showed that total gross revenues climbed from ₦17.08 trillion in 2023 to ₦29.45 trillion in 2024 and ₦37.44 trillion in 2025, bringing cumulative earnings to ₦83.97 trillion within the period.
However, deductions from the Federation Account also surged from ₦6.22 trillion in 2023 to ₦13.38 trillion in 2024 and ₦14.93 trillion in 2025, amounting to a combined ₦34.53 trillion over the three years.
This means that about 41.1 per cent of total revenues was deducted at source before distribution to the three tiers of government, reducing their share.
The development comes amid deepening fiscal pressure, a widening budget deficit, and a growing appetite for borrowing, which has significantly pushed Nigeria’s public debt to $110.3 billion, equivalent to about ₦159.2 trillion as of 31 December 2025, raising concerns about sustainability and debt servicing capacity.
The World Bank in the report said this growing wave of first-line deductions from the Federation Account is quietly eroding the revenues available to federal, state, and local governments, despite a surge in overall earnings driven by recent economic reforms.
In its latest Nigeria Development Update titled ‘Nigeria’s Tomorrow Must Start Today: The Case for Early Childhood Development’, the global lender warned that allocations to key government agencies now consume a significant portion of national revenues before they are even shared, effectively shrinking the fiscal space available for development.
A breakdown further shows that deductions accounted for 36.4 per cent of revenue in 2023, rose sharply to 45.4 per cent in 2024, and moderated slightly to 39.9 per cent in 2025.
The data indicates that while revenues grew 72.4 per cent between 2023 and 2024, and 27.1 per cent between 2024 and 2025, deductions increased even faster, jumping 115.1 per cent between 2023 and 2024, and 11.6 per cent between 2024 and 2025.
The increase in deductions was largely driven by higher transfers to Ministries, Departments and Agencies funded through fixed percentages of gross revenue collections.
These agencies include the Nigerian Upstream Petroleum Regulatory Commission, Nigerian Midstream and Downstream Petroleum Regulatory Authority, Nigeria Customs Service, Nigerian National Petroleum Company Limited, and others.
The report noted that by 2025, some of these deductions had grown so large that individual agencies were receiving more funds than several Nigerian states.
The World Bank noted that while Nigeria’s revenue performance has improved following the removal of the petrol subsidy and foreign exchange reforms, the structure of deductions means that much of the gains are automatically diverted.
An analysis of the data showed that total deductions rose from ₦6.22 trillion in 2023 to ₦13.38 trillion in 2024, representing a sharp 115 per cent increase, before climbing further to ₦14.93 trillion in 2025, an additional 11.6 per cent rise.
Within this, transfers to MDAs for the cost of collection and refunds surged from ₦1.88 trillion in 2023 to ₦4.18 trillion in 2025, more than doubling over the period.
Refunds to subnational governments and other statutory obligations also spiked significantly, jumping from ₦1.52 trillion in 2023 to ₦6.87 trillion in 2024, before moderating to ₦4.57 trillion in 2025.
The report stressed that by 2025, the scale of these deductions had become so large that some agencies were receiving more funds than entire states.
The rising deductions also surpassed federal spending on key social and economic sectors, further limiting the government’s ability to fund infrastructure and development projects.
The PUNCH