Oil-producing states in Nigeria received a total of N124.07 billion in derivation revenue for May 2025, according to figures released after the latest Federation Account Allocation Committee (FAAC) meeting.
The figure reflects sustained disbursement under the derivation principle, even as total national allocations declined during the month.
The allocation includes N116.89 billion from statutory oil-related revenue and an additional N7.17 billion from exchange rate gains tied to crude earnings.
The funds were distributed exclusively to qualifying states in line with Section 162(2) of the 1999 Constitution.
The Ministry of Finance confirmed the figures in an official statement released after the June 2025 Federation Account Allocation Committee (FAAC) meeting.
The derivation revenue was disbursed separately from the general federal allocation shared among the 36 states and 774 local government areas.
Derivation Remains Critical to Oil-State Finances
Derivation revenue continues to play a central role in the fiscal capacity of Nigeria’s oil-producing states, including Rivers, Akwa Ibom, Delta, Bayelsa, Edo, Ondo, Imo, and Abia. The inflows serve as a supplementary fund beyond general FAAC allocations, enabling these states to support infrastructure development, public salaries, and capital-intensive projects.
Despite month-on-month fluctuations in gross federation earnings, derivation allocations have remained relatively stable, reflecting the continued flow of crude export revenues and exchange rate margins into the federation account.
Breakdown of Components
From the total N124.07 billion received in May:
These amounts were calculated based on actual oil revenue collections and do not include Value Added Tax (VAT), electronic levies, or other non-mineral revenue categories, which are shared among all states equally.
Strategic Importance and Economic Dependence
Several oil-producing states rely on derivation revenue for over 40% of their annual budgets, making it a critical economic lifeline. The continued availability of derivation funds has helped cushion the impact of broader macroeconomic pressures, including inflation, debt servicing obligations, and external revenue shocks.
However, economic analysts warn that heavy dependence on oil-related derivation limits fiscal diversification. Some states have begun implementing internally generated revenue (IGR) reforms, but derivation inflows still dominate monthly receipts.
The N124.07 billion distributed in May 2025 underscores the ongoing importance of oil revenue to Nigeria’s subnational economies. As global energy markets evolve and federal revenue reforms progress, the derivation formula remains a constitutionally protected buffer for oil-producing states navigating economic volatility.
