Federation Account Inflows Hit N56.4trn In 34 Months Amid Rising Debt

Nigeria’s Federation Account inflows have surged to a total of N56, 421,706,100,867.7 trillion over the last three years, driven by fiscal reforms and better revenue collection.

Chairman of the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), Dr. Bello Shehu, unveiled the figures at the opening of a two-day national stakeholders’ discourse on “Enhancing Fiscal Efficiency and Revenue Growth Under the Nigeria Tax Act, 2025” in Abuja, on Monday.

However, analysts have expressed concerns that the high revenue inflows has not stemmed a sharp rise in public borrowing, with total debt climbing from N97.34 trillion at the end of 2023 to N152.4 trillion by mid-2025. This stark fiscal disconnect raises questions about budget sustainability.

The figures—drawn from official accrual data—show a notable rise in gross federation revenue from N11.93 trillion in 2023 to approximately N21.43 trillion in 2024, and a further N23.06 trillion in the first ten months of 2025. This cumulative performance underlines the impact of recent fiscal reforms, including the harmonisation of tax laws under the Nigeria Tax Act, 2025, slated to take effect from January 2026.

RMAFC’s chairman stated that the continued growth in federation receipts reflects improved revenue mobilisation, strengthened coordination among agencies, enhanced digital tracking systems, and rigorous audits that have expanded the revenue pool available for federal, state and local governments.

He described the inflow trend as “a strong signal of progress towards a more resilient and diversified public finance system with less dependence on oil earnings,” noting that the reforms have eased compliance burdens and eliminated duplicated tax provisions.

However, the period of rising federation revenue has coincided with substantial borrowing to finance budget deficits, pointing to ongoing fiscal pressures. According to the Debt Management Office (DMO) and recent financial reports, Nigeria’s total public debt has risen sharply from N97.34 trillion at the end of 2023 to about N149.39 trillion by March 31, 2025, before climbing further to an estimated N152.40 trillion by mid-2025, driven by both domestic and external loans.

Analysts believe that the escalation in borrowing underscores the persistent challenge of financing government operations amid revenue shortfalls, with debt servicing consuming a growing share of federal resources. In 2024 alone, Nigeria reportedly spent N12.36 trillion on debt servicing, equivalent to over 35 per cent of the national budget.

Despite these fiscal constraints, the RMAFC has maintained that the ongoing tax and revenue reforms are integral to enhancing Nigeria’s budgetary space and reducing the deficit financing gap. The Commission’s chairman urged stakeholders at the two-day discourse to engage deeply with the provisions of the new tax framework to support long-term fiscal stability and inclusive economic growth.

Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, also used the platform to situate the RMAFC debate within the broader context of fiscal federalism, noting that about 85 per cent of Nigeria’s resources are already assigned to states and local governments.

According to him, the challenge is therefore not simply about re-allocation or introducing new taxes, but about optimising existing revenue sources. He pointed out that personal income tax contributes less than eight per cent of total tax revenue in Nigeria, compared with a global average of about 30 per cent, underscoring deep structural inefficiencies in revenue mobilisation.

He emphasised the need for a more equitable distribution of federation revenue among the three tiers of government and between states and local governments, clarifying that FAAC is not a “federal allocation” but a distribution of federation revenue that belongs to all tiers.

Oyedele argued that responsibilities must be matched with revenues, calling for urgent budgetary reforms anchored on accountability, transparency and the elimination of multiple taxation, which he said continues to undermine productivity and investor confidence.

On tax reforms, Oyedele said the new laws are deliberately structured to support capital market growth and investment. He explained that investors enjoy near-total tax exemption, with about 99 per cent unconditional and only one per cent subject to conditions.

He highlighted wide-ranging capital gains tax exemptions covering retail investors, reinvestments, pension funds, REITs, securities lending, corporate reorganisations and mergers and acquisitions, alongside deductions for capital losses and incidental costs. Other incentives include the removal of withholding tax on bonus shares, stamp duty exemptions on stock and share transfers, and measures to create a level playing field between listed and unlisted entities.

He disclosed plans to reduce the Companies Income Tax rate from 30 per cent to 25 per cent, harmonise earmarked taxes such as TETFund, NITDA and NASENI levies, and collapse more than 60 disparate taxes and levies into fewer than 10.

Oyedele added that the reforms will moderate excessive fees imposed by government agencies through mechanisms such as a Tax Ombud, eliminate the minimum tax on company turnover, exempt state government bonds from tax, and ease cash-flow pressures through lower or final withholding tax regimes for businesses and foreign investors.

Also, national president of the Nigerian Association of Chambers of Commerce, Industry and Agriculture (NACCIMA) Jani Ibrahim said as the apex body representing the organized private sector nationwide with more than a hundred City, State and bilateral Chambers of Commerce under its belt, NACCIMA recognizes that a modern, efficient and equitable tax system is indispensable to economic growth.

“When tax policies are clear, predictable and business-friendly, enterprises are better positioned to invest, expand, create employment and contribute more meaningfully to national revenue,” he stated.

On his part, the chairman of the Fiscal Efficiency and Budget Committee, Amb. Desmond Akawor said the discourse is designed to provide a robust platform for constructive engagement among policymakers, tax administrators, industry leaders, professional bodies, development partners, and other key stakeholders. Over the next two days, participants will be involved in technical presentations, panel discussions, and interactive sessions.

The aim is to clarify key provisions of the Tax Reforms Acts and their implications for revenue-generation; identify challenges, opportunities, and practical strategies for strengthening fiscal efficiency at the federal, state, and local government levels, deepen collaboration among stakeholders to promote transparency, reduce leakages, and enhance tax compliance; and discuss innovative approaches for expanding the tax base.