Nigerian govt proposes reduction in FAAC share

The federal government has proposed a major shift in the distribution of funds from the Federation Account Allocation Committee, FAAC.

Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr Taiwo Oyedele, revealed this via his X handle on Sunday.

Oyedele said the federal government was set to take only 10 percent of the total FAAC allocations while states and local governments will receive a combined 90 percent.

This represents a drastic departure from the current sharing formula, which allocates 52.68 percent to the federal government, 26.72 percent to states, and 20.60 percent to local governments.

Oyedele said under the new proposal, the distribution formula for the states and local governments would include a clause stipulating that 60 percent of their share will be based on the principle of derivation.

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He further explained that the change was part of broader reforms aimed at eliminating numerous nuisance taxes and streamlining the tax collection process.

According to him, the federal government had to make this concession to get states on board with a centralized and more efficient tax collection system.

“The new approach not only simplifies tax collection but also lays the foundation for fiscal federalism, giving states and local governments more autonomy over their revenues,” Oyedele said.

He added that the proposed reforms represent a bold step towards decentralizing revenue collection and promoting a more balanced fiscal structure in Nigeria.

Oyedele emphasized that the full impact of the proposed tax overhaul would be monitored in the coming months as discussions continue between the federal government and other tiers of government.