Allocating of Revenue Act and the regulation of PSAF

Every month, the federal government's Ministry of Finance provides a report on the amount shared by the federal, state, and joint local government councils in Nigeria. The sharing of this fund is from the federation account and the regulation to the sharing of funds in this account is based on the allocating of Revenue Act 2004 as amended. 

To ensure uniformity in the sharing of funds to the three tiers of government, the federal government, through its legislative arm, has enacted the Allocation of Revenue Act. The act specifies the basis for the distribution of revenue between federal, state, and local governments. It also spells out the formula used for the distribution. In December 2023, the Federal Account Allocation Committee (FAAC) shared a total of 1.13 trillion Naira from the federation account to federal, state, and local governments. 

The FAAC is a department in the Ministry of Finance responsible for the distribution of revenue in the federation account among the three tiers of government in Nigeria. They apply the allocation of the Revenue Act, 2024 as amended in this distribution. Sections in the act are stated below. Note that these sections are copied from the ICAN study pack. 

Sections in the allocation of revenue act

1 Distribution of the Federation Accounts, etc.

2 Formula for distribution between the Federal and state governments

3 Formula for distribution between local governments

4 Proportion of revenue to be paid by each state to State Joint Local Government Account

5 Allocations under Special Funds

6 Establishment of Federation Account Allocation Committee and functions

7 Establishment of Joint Local Government Account for each State and functions

8 Limit on power of state governments to borrow money

9 Report by Accountants General of the Federation

From the nine sections above, it is clear how the Allocation of Revenue Act impacts the regulation of public sector accounting and finance (PSAF). The FAAC functions are clearly stated and how they share the funds in the federation account among the tiers of government in Nigeria. It also states the limit of the state government in borrowing funds as well as the report provided by the accountant general of the federation on the federation account.