Nigeria: Don’t be fooled: ‘Higher FAAC allocations don’t mean richer states’

By Zuleihat Owuiye, Nigeria

Most Nigerians are being misled right now about what is really happening with money going to states. The Federal Government keeps pointing to bigger monthly FAAC allocations as proof that states are now “rich” and should deliver more. Because many governors have governance problems of their own, they are in no position to push back. So the blame for poor service delivery is being shifted downward, unfairly.

The truth is simpler, and harsher: states are not richer. In fact, with the exception of a few like Lagos, Abia, Adamawa and Zamfara that are showing some results, most states are struggling more than ever to meet basic obligations.

Nobody disputes that reforms under President Tinubu are designed for long-term gains. And nobody disputes that states and the FCT are receiving larger nominal allocations each month 

The problem is purchasing power. Every government in Nigeria is paying more for everything — fuel, electricity, cement, drugs, food, airfare, phone services. The FG and the 36 states are not exempt from inflation. 

So while the figures on paper look bigger, what those figures can actually buy has shrunk dramatically.

Promoters of the “states are now rich” narrative fall into two groups: economic illiterates who don’t understand inflation, and mischief makers who do understand it but choose to twist it. The first group is being used by the second to turn citizens against state governments.

For context: in 1974, a marketing manager in a multinational earned N630 a month when the exchange rate was N0.70 to $1. To have the same purchasing power today, that manager would need about N1.26 million a month. Paying N900,000 today would still be a step backward.

State governments are the largest single buyers of goods and services in their states. Schools, hospitals, roads, and security all cost more. Governors are not gods. They cannot control market prices.

On top of that, debt-servicing costs have climbed because the Central Bank dictates interest rates. States have no control over that either.

Security is another drain. With nationwide insecurity, many governors are forced to spend unplanned billions on vigilantes, logistics, and support for security agencies. That money was never in the original budget.

The FG has also been running a communication trick with debt. A few weeks ago, a viral message celebrated that “Nigeria no longer owes the IMF” as a sign of progress.

What was not mentioned: the government paid off low-interest IMF loans by borrowing at much higher commercial rates. Today Nigeria’s total debt burden stands at about N160 trillion higher than it was before the IMF was paid off. That is not fiscal prudence. That is replacing cheap debt with expensive debt.

When poverty rises nationally, states feel it first. More parents are pulling children out of private schools and into public schools, increasing pressure on state education budgets. More people are showing up at state hospitals because they can no longer afford private care. More communities are asking state governments for palliatives and support.

In short, demand for state services is rising at the exact moment the real value of state money is falling.

The Federal Government is also collecting more revenue, just like states. Yet there is little evidence that service delivery at the federal level has improved in proportion. Roads are still uncompleted, hospitals are still underfunded, and power remains unreliable.

It is difficult to demand more from states when citizens do not see better results from Abuja either

States are not richer in 2026 than they were in 2022. In real terms, they are poorer. Inflation has eaten the gains. Debt costs have risen. Security costs have exploded. And poverty has increased the demand for services.

Governors are not blameless. There are still issues of waste, corruption, and poor planning in many states. But to pretend that bigger allocation figures automatically equal better performance is to ignore basic economics.

Until we start measuring government performance by purchasing power and outcomes, not just by naira figures, Nigerians will continue to be fooled — and states will continue to be set up to fail.