A new report from the FBNQuest Merchant Bank has suggested that a sustained rise in Nigeria’s crude oil production could significantly boost future allocations to the three tiers of government and strengthen overall public revenue.
The projection comes as total revenue disbursements to the federal, state, and local governments rose to a record high of over N1.8 trillion in July 2025, reflecting income accrued in June. The July allocation marked a 10 per cent month-on-month (m/m) increase and the highest FAAC payout in recent history.
The increase in overall revenue was primarily driven by a strong performance in statutory revenue, which grew by 18 per cent m/m to over N1 trillion. Non-mineral revenue also contributed positively, with N100 billion added to the FAAC pool. However, exchange rate gains, which have in recent months bolstered federal revenue, fell sharply to N39 billion, down from N77 billion the previous month.
According to the FAAC communiqué, the decline in exchange rate gains can be attributed to the relative appreciation of the naira, which gained 3.5 per cent m/m to close at N1,532/$1. This currency stability was largely supported by the Central Bank of Nigeria’s (CBN) ongoing FX interventions, aimed at improving liquidity in the foreign exchange market.
Despite the dip in exchange rate-related income, oil sector dynamics are drawing fresh attention. Analysts at FBNQuest Merchant Bank point to a recent increase in crude oil output during June, which, if sustained, could positively influence future statutory revenue collections.
They said, “As soil remains a dominant source of federal income, stronger production volumes and stable prices could shore up government finances in the months ahead”.
However, revenue from Value Added Tax (VAT) recorded a 9 per cent m/m decline, falling to N632 billion, reflecting softer consumer demand and economic pressures facing households and businesses.
In terms of disbursements, the federal government received N645 billion, a 20 per cent m/m increase, while state governments received N607 billion, up 5 per cent m/m, and local governments got N445 billion, a 6 per cent m/m rise.
The 13 per cent derivation fund for oil-producing states saw a marginal decline of 2 per cent m/m to N121 billion, due to lower oil-related receipts.
Looking ahead, the report indicates that enhanced oil output and effective fiscal coordination will be essential in maintaining revenue stability and ensuring that government at all levels can meet their growing expenditure obligations.