Nigerian government dismisses claims of revenue diversion, says FAAC deductions are legitimate fiscal allocations.

The federal government has stated that deductions from federation earnings by the Federation Account Allocation Committee (FAAC) are being wrongly portrayed as revenue diversion.

In a statement released on Sunday and signed by Taiwo Oyedele, the Ministry of Finance said some media reports have misrepresented the findings of the World Bank in its Nigeria Development Update (NDU).
According to the ministry, certain reports have described the deductions highlighted in the NDU as diversion of revenue or hidden spending. However, it clarified that the World Bank attributed these deductions to statutory transfers, savings and investments, security-related expenditures, and other legitimate fiscal obligations.
“The attention of the Federal Ministry of Finance has been drawn to recent media reports and commentaries that misrepresent the findings of the latest Nigeria Development Update by the World Bank, particularly claims suggesting that a significant portion of federation earnings is being ‘diverted’ or constitutes ‘hidden spending,’” the statement read.
The ministry stressed that such interpretations reflect a misunderstanding of the fiscal system. It explained that FAAC deductions include statutory transfers, savings and investments, security-related expenses, cost-of-collection charges, refunds to Ministries, Departments and Agencies (MDAs), and transfers benefiting subnational governments.
It further noted that refunds and transfers to states and other tiers of government are not leakages but legitimate fiscal flows, including repayments of obligations and allocations backed by law.
The ministry also questioned why some commentaries ignored the World Bank’s positive assessment of ongoing reforms by the federal government.
It stated that the World Bank acknowledged that recent reforms would enhance transparency and boost revenue. These include measures such as an executive order aimed at safeguarding the remittance of petroleum revenues, which are expected to increase funds available to all tiers of government by about 0.4 percent of GDP annually.
The ministry added that selective reliance on past data, without considering forward-looking analysis and ongoing reforms, presents a distorted picture of Nigeria’s fiscal situation.
Highlighting broader economic indicators, the ministry said the report showed that economic growth is becoming more widespread across sectors, inflation is gradually declining due to policy actions, and the country’s external position has improved with stronger reserves and a current account surplus.
It also noted improvements in debt indicators, including a reduction in the debt-to-GDP ratio for the first time in over a decade—developments it attributed to the administration’s macroeconomic policies and financial reforms.
According to the ministry, the World Bank’s conclusion is not that Nigeria’s fiscal system is failing, but that reforms are working and should be sustained to achieve inclusive growth.
Reaffirming its commitment, the Ministry of Finance said the federal government will continue to strengthen revenue mobilisation, ensure efficient public spending, and deepen reforms to enhance fiscal transparency.
It urged stakeholders, media organisations, and the public to engage responsibly with fiscal information and avoid misinterpretations that could undermine reform efforts.
The ministry also noted that on April 10, the World Bank removed the Nigeria Development Update from its website three days after its release.