How states are deploying increased FAAC revenues to drive development

…as World bank, others call for stronger accountability, measurable outcomes

Increased allocations from the Federation Account have enabled state governments to expand spending on roads, healthcare, education, workers’ welfare and other public services, but officials and development partners have warned that higher revenues must be matched by stronger accountability and measurable results.

Speaking during a plenary session at the 32nd Nigerian Economic Summit (NES 32), Abdullahi Sule, Nasarawa State Governor, said improved revenue allocations had helped his administration undertake infrastructure and social-sector projects without relying on commercial bank borrowing to the same extent as previously.

He cited investments in roads, hospitals, primary healthcare centres, pension payments and workers’ welfare as areas where improved fiscal management had supported development.

Sule further said increased revenue had strengthened local government finances, enabling councils to save part of their monthly allocations and subsequently fund projects such as water supply, solar power and healthcare facilities.

However, he said states must complement increased allocations with efforts to diversify their revenue bases and attract productive private investment.

Sule said sustainable investment in the solid minerals sector required collaboration among federal and state governments, host communities and private investors, stressing the need to process mineral resources locally to create jobs, generate revenue and protect the environment.

The governor said Nasarawa had adopted a policy of encouraging mining companies to establish processing plants in the state rather than extract raw materials for processing elsewhere.

He explained that although the state government lacked the constitutional authority to issue mining licences, it had introduced an executive order requesting investors who obtained licences from the Federal Government to establish processing facilities in Nasarawa.

“We don’t want our raw materials to come out somewhere and create a future devastation to the land,” Sule said, explaining that local processing would support value addition while helping the government manage the environmental and economic consequences of mining.

According to him, the policy had helped attract four to five companies involved in mineral processing, including lithium processors.

He identified Avatar Lithium Processing Plant, with a reported capacity of 3,000 metric tonnes daily, and New Energy Lithium Processing Plant, with a reported capacity of 6,000 metric tonnes daily, as major investments in the state.

Sule said the state government’s responsibility was to create an enabling environment for investors through access to land, roads, electricity, water and security, while ensuring that host communities maintained constructive relationships with mining companies.

He added that investors must undertake environmental impact assessments and provide employment opportunities for members of host communities.

The governor said his administration spent about two years preparing the investment environment before the first set of investors arrived in 2021, following his assumption of office in 2019.

He emphasised that the state was seeking investors committed to long-term operations rather than those interested in short-term gains.

“We’re looking for investors that are here to stay, so that we can have a long-term relationship beyond my tenure of eight years in office,” he said.

Mining revenue, community development

Sule also highlighted the use of negotiated signature bonuses as a mechanism for generating additional revenue from investments in the state’s mineral resources.

Beyond mining, Sule cited the development of 10,000 hectares of land for rice production as another example of the state’s efforts to diversify its revenue base through productive investments.

He said Nasarawa had also worked with development partners, including the World Bank, to improve its business environment and establish a one-stop shop for investors.

The governor noted that sustainable investment required more than the availability of natural resources, adding that investors needed confidence in the security of their capital, the quality of infrastructure and the government’s commitment to supporting their operations.

He also argued that improved revenue allocation to states and local governments must be accompanied by effective resource management.

Mathew Verghis, World Bank country director, said states needed to pursue two complementary approaches to attracting investment: facilitating specific investment opportunities and implementing reforms that make their economies more attractive to businesses generally.

Using Nasarawa’s mining investments as an example, Verghis said governments must do the necessary groundwork to ensure that investors could establish operations and that the resulting benefits reached host communities.

He said the World Bank-supported State Action on Business Enabling Reforms (SABER) programme was helping states improve business regulation, land administration, investment promotion and public procurement frameworks.

Verghis cited reforms to right-of-way charges for fibre broadband deployment as an example of how policy changes could unlock private investment.

He said 30 states had capped aggregate right-of-way charges for broadband deployment at N145 per metre, while other states had waived the requirement.

According to him, the reforms helped drive increased fibre deployment, with Yobe recording a 95 per cent increase in 2025 compared with 2022. Jigawa recorded a 90 per cent increase, Plateau 59 per cent, Ekiti 56 per cent and Niger 46 per cent.

He said such reforms demonstrated how improvements in the business environment could translate into infrastructure expansion and new investment opportunities.

However, Verghis stressed that regulatory reforms alone were insufficient, adding that states must also improve public financial management, budget implementation and the quality of public services.

He said the World Bank-supported State Fiscal Transparency, Accountability and Sustainability programme had contributed to stronger fiscal reporting and accountability across the states.

According to him, all 36 states now publish audited financial statements in line with established standards, while states have also adopted measures covering budget implementation reporting, revenue administration, procurement and debt management.

Verghis said these reforms had become particularly important following increased allocations to states after the removal of the petrol subsidy and the unification of exchange rates.

He noted that state governments had directed significant portions of the additional resources towards transportation, particularly roads, alongside increased spending on health, education and other sectors.

Nevertheless, he warned that governments must improve the integration of development-partner financing into their budgets to obtain a more complete picture of public spending and strengthen planning.

He added that states needed to move beyond publishing financial information to using the data to improve measurable outcomes in education and healthcare.

“The states, including Nasarawa, and in many cases led by Nasarawa, have done quite amazing work over the last few years,” Verghis said.

For Nathaniel Adojutelegan, representative of the Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC), the commission was working on a revised revenue allocation formula to reflect changing constitutional and economic realities.

He explained that the commission was responsible for monitoring revenue accruing to the Federation Account, distributing revenue among the federal, state and local governments, and advising governments on ways to improve fiscal efficiency.

Adojutelegan said the commission also advised states to diversify their revenue sources by investing in agriculture, tourism and solid minerals.

He identified the National Resources Development Fund as one avenue through which states could access funding for these sectors, urging state governments to develop viable proposals that would support economic diversification.

He also called on states to organise artisanal miners into recognised cooperative societies to improve their formal participation in the economy, expand employment opportunities and bring more operators into the tax net.

On local government finances, Adojutelegan said the commission was working towards stronger monitoring mechanisms to ensure that funds allocated to councils reached them and were used for projects that directly benefited residents.

He said improved monitoring was necessary because concerns persisted over whether allocations intended for local governments were translating into services and development at the grassroots.

Also speaking at the session, Ekenem Isichei, deputy director of policy advocacy at the Gates Foundation, said higher government allocations did not automatically translate into improved public services, particularly as inflation and rising operating costs continued to put pressure on state budgets.

He said the foundation was encouraging states to adopt a framework centred on raising revenue, allocating it to priority sectors, releasing the funds and measuring whether the spending produced the intended results.

According to Isichei, governments should prioritise productive infrastructure, healthcare, education and agriculture while ensuring that budget commitments reflect the resources they can realistically deploy.

He argued that states should avoid announcing ambitious sectoral budgets when the actual releases were significantly lower, insisting that planning must be grounded in available resources and clearly defined priorities.

In healthcare, he said governments should assess performance by verifying whether medicines and other essential commodities were available in facilities and whether healthcare workers were present to deliver services.

Isichei also highlighted the importance of using reliable data to guide public expenditure, describing state-level data and intelligence units as tools for tracking service delivery and identifying gaps in implementation.

He cited examples of states using regular performance reviews, public financial disclosures and electronic attendance monitoring to strengthen accountability.

In one example, he said an electronic monitoring system for healthcare workers helped identify 500 ghost workers and save a state approximately $2 million.

Isichei said stronger collaboration between state governments and local government authorities could help ensure that public funds translated into tangible improvements in service delivery.

He added that transparent reporting, realistic budgeting and evidence-based decision-making were essential to making increased government revenues deliver better outcomes for Nigerians.