Nigeria’s states and the Federal Capital Territory (FCT) are set to receive a fresh financial boost as the Federation Account Allocation Committee (FAAC) has recommended the disbursement of N92.8 billion in withholding tax refunds collected on their behalf.
The funds are expected to be transferred to the states and the FCT after the completion of a reconciliation exercise involving relevant revenue agencies responsible for the collections.
The recommendation followed complaints from some state governments that withholding taxes collected on their behalf were being paid into the Federation Account without proper reconciliation.
Reconciliation Exercise Confirms Refund
According to a report by the FAAC Post Mortem Sub-Committee for February 2026, the states had earlier written to both FAAC and the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) requesting a review of outstanding withholding taxes collected by the Nigeria Revenue Service (NRS), formerly known as the Federal Inland Revenue Service (FIRS).
To address the issue, RMAFC engaged SMD Consulting to carry out a reconciliation exercise with the NRS.
The consulting firm reportedly confirmed that N92.8 billion is due to the states and the FCT as withholding tax refunds. The report noted that the funds would be released after the agreed consultancy fee is deducted.
Verification of Frontier Oil Exploration Spending
The FAAC report also provided updates on other financial reviews concerning the Federation Account, including the 30 per cent deduction set aside by Nigerian National Petroleum Company Limited (NNPC Ltd) for frontier oil exploration.
According to the committee, the national oil company has already submitted documentation detailing activities carried out in several frontier basins and the funds expended on the projects.
However, an ad-hoc committee established by FAAC plans to conduct site visits to some of the exploration locations to independently verify the projects and ensure transparency.
Federation Account Revenue Hits N2.6trn
The report also revealed that total revenue available for distribution through the Federation Account in December 2025 stood at about N2.6 trillion, based on figures from the Central Bank of Nigeria (CBN).
A breakdown of remittances showed that the VAT account managed by the Nigeria Revenue Service contributed the largest share of about N913.96 billion, representing 35.35 per cent of the total revenue for the month.
The NRS also remitted approximately N685.90 billion, accounting for 26.53 per cent of the total.
Meanwhile, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) contributed about N593.11 billion, representing 22.94 per cent of the total revenue.
The Nigeria Customs Service (NCS) remitted approximately N342.94 billion, representing 13.26 per cent.
Updates on $3.3bn Project Gazelle Facility
The FAAC report also examined financial flows related to Project Gazelle, a $3.3 billion crude oil-backed financing arrangement sponsored by NNPC Ltd to boost foreign exchange liquidity.
Arranged by African Export-Import Bank, the facility involves the supply of about 90,000 barrels of crude oil per day through a Special Purpose Vehicle to repay the loan.
Between April 2024 and December 2025, about N5.7 trillion was reportedly paid from the Project Gazelle escrow account.
Of this amount, N2.115 trillion was paid to the NUPRC, while N3.561 trillion was remitted to the NRS before being distributed to the three tiers of government through the Federation Account.
However, FAAC has directed relevant agencies to provide additional details on the actual dollar payments made under the financing arrangement and the outstanding balance to determine when the loan will be fully repaid.
Ongoing Reviews on Revenue Remittances
The committee also revealed that about N707.2 billion in revenue is currently undergoing reconciliation between various agencies and the Federation Account.
Out of this figure, N480.74 billion relates to reconciliation between the NUPRC and NNPC Ltd, while N225.42 billion involves reconciliation between the NRS and the national oil company.
In addition, about N1.03 billion remains under direct reconciliation with NNPC Ltd.
FAAC officials said the ongoing financial reviews are aimed at strengthening transparency and accountability in the management of funds shared among the Federal Government, states and local governments