Government revenue is having a good year. The economy is not.

Between January and May 2026, the Federation Account Allocation Committee disbursed ₦10.45 trillion to the three tiers of government: federal, state, and local. That is a 25.85% increase compared to the ₦8.30 trillion shared in the same period last year. By any measure, that is a significant jump. Yet food prices are still climbing, businesses are still squeezed, and most households have not seen any meaningful relief.

That gap is what this piece is about.

How the Revenue Got Here

Three things drove the surge.

The biggest was Executive Order No. 9, which President Tinubu signed in February 2026. The order directed that all oil royalties, taxes, and profit remittances flow straight into the Federation Account, without NNPCL taking prior deductions for management fees or the Frontier Exploration Fund. That single policy change plugged a leakage that had quietly shortchanged states and local governments for years.

Beyond that, Companies Income Tax and Petroleum Profit Tax collections improved through the year, with May recording particularly strong inflows. The FAAC disbursement for May alone came to ₦2.30 trillion, up from ₦2.26 trillion in April. The naira’s relative stability compared to the crisis years of 2023 and 2024 also helped, since it raised the naira value of oil receipts in the statutory pool.

Breaking Down Who Got What

Of the ₦10.45 trillion shared between January and May, the federal government received ₦3.72 trillion. States got ₦3.56 trillion collectively, and local government councils took home ₦2.51 trillion.

But the distribution across states is far from equal. Ten states captured 40.1% of all Q1 2026 FAAC allocations. Lagos dominates, and with good reason: the state contributed over ₦533 billion to the national VAT pool in January alone, more than half of the entire country’s VAT intake for that month.

One notable development this year is that the FCT received its first VAT pool allocation under the new tax reform framework, receiving ₦15.8 billion in January 2026. Under the old formula, Abuja’s VAT contributions were pooled into the federal government’s share. The new formula corrects that.

At the other end of the spectrum, states like Imo, Taraba, and Benue continue to receive far more than they contribute. Imo got roughly ₦19 for every ₦1 it put into the VAT pool in January, the highest ratio in the country. That dynamic raises long-standing questions about fiscal dependence and whether these states have any real incentive to grow their own revenue base.

The Problem the Numbers Don’t Show

Rising FAAC allocations and improving living conditions have never moved together in Nigeria, and 2026 is no different.

S&P Global, in a report published yesterday, raised its inflation forecast for Nigeria to 16.9% for 2026, the largest upward revision among emerging markets in the EMEA region. Food inflation is still above 17%. Transport costs remain elevated following the fuel price shock linked to the Middle East conflict earlier this year. Household purchasing power has taken a sustained hit since the subsidy removal and naira devaluation of 2023, and ordinary Nigerians are still absorbing those costs.

There is also the debt question. Nigeria’s 36 states paid a combined ₦455.38 billion in foreign debt service deductions directly from their FAAC allocations in 2025. A chunk of every monthly allocation goes to repaying World Bank, China, and other multilateral loans before salaries are paid or projects are funded.

So while the gross numbers look impressive, what actually reaches service delivery is considerably less.

What It Means for Business

For businesses, the FAAC story plays out in indirect but real ways. State governments with stronger allocations tend to clear contractor backlogs faster, which releases liquidity into local supply chains. Better-funded LGAs, in principle, maintain the markets, roads, and drainage that affect the daily cost of doing business at the grassroots level.

The risk is that with S&P now projecting GDP growth of just 3.7% for 2026 and consumer demand still under pressure, businesses that depend on household spending are operating in a tight market regardless of what government is collecting.

The more grounded reason for optimism is this: if Executive Order 9 holds and oil remittances continue flowing directly into FAAC as intended, states could see their most predictable funding in years. Cleared salary backlogs, resumed capital projects, and gradually improving contractor payments in secondary cities would follow.

Bottom Line

The government is collecting more money than it has in years. That is genuinely good news for Nigeria’s fiscal position. But revenue growth and economic relief are two different things, and the distance between them is where most Nigerians live. Until allocations consistently translate into visible outcomes, working roads, paid salaries, functioning primary healthcare, the FAAC numbers will remain a story about government finance rather than about people’s lives.

Capital Reporters tracks Nigerian business, policy, and public finance. Sector Watch publishes every week.