State governments across Nigeria and the Federal Capital Territory (FCT) are expected to receive a fresh financial boost following a recommendation by the Federation Account Allocation Committee (FAAC) to distribute ₦92.8 billion in withholding taxes collected on their behalf.
The recommendation emerged from deliberations of FAAC after a reconciliation process was initiated to address concerns raised by several state governments over the handling of withholding taxes deducted for them by federal revenue authorities.
According to details contained in the February 2026 report of the FAAC Post Mortem Sub-Committee, the funds will be transferred to the accounts of the affected states and the FCT once the reconciliation exercise involving relevant revenue agencies is concluded.
The development followed formal complaints lodged by some state governments, who alleged that withholding taxes collected on their behalf were being paid directly into the Federation Account without proper reconciliation or clear remittance procedures.
Concerned about the situation, the states reportedly wrote to FAAC and the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) requesting a detailed review of outstanding withholding tax collections.
Their request focused particularly on taxes collected by the Federal Inland Revenue Service (FIRS), which now operates under the new name Nigeria Revenue Service (NRS) following recent reforms in the country’s tax administration structure.
In response to the complaints, FAAC initiated a reconciliation exercise through its Post Mortem Sub-Committee to verify the actual amount of withholding taxes collected on behalf of state governments.
The review examined records submitted by federal revenue agencies to determine the outstanding funds that should be remitted to the states.
Following the review, the committee identified ₦92.8 billion as the amount due to the states and the FCT.
Officials said the funds represent accumulated withholding tax collections that were yet to be properly credited to the benefiting states.
If implemented, the distribution of the funds is expected to provide significant financial relief to many state governments, which rely heavily on allocations from the Federation Account to finance their budgets and public services.
For several states grappling with rising expenditure demands, including salary obligations, infrastructure projects and social programmes, the additional funds could help ease fiscal pressures.
Analysts also note that the payment could strengthen confidence among state governments regarding transparency in the management of shared revenues.
Withholding tax is a form of advance tax payment deducted at source from certain transactions such as contracts, services, and interest payments.
The tax is usually collected by the federal tax authority but is partly due to state governments depending on the nature of the transactions involved.
Because of its structure, accurate reconciliation between collecting agencies and benefiting governments is necessary to ensure proper remittance.
The issue raised by the states has also sparked renewed discussions about transparency and accountability in Nigeria’s revenue management system.
Financial experts say regular reconciliation between federal and state agencies is critical to preventing disputes over tax collections and ensuring that each tier of government receives its rightful share.
The FAAC Post Mortem Sub-Committee therefore recommended stronger coordination among revenue agencies to prevent future discrepancies in the handling of withholding taxes.
Although the recommendation has been made, the actual transfer of the ₦92.8 billion will only occur after the reconciliation process involving the relevant revenue agencies is fully completed.
Once finalised, the funds will be credited to the accounts of the states and the FCT through the Federation Account distribution framework.
For many state governments, the anticipated payment represents an unexpected financial windfall that could help support ongoing development programmes and address pressing fiscal needs.
