The Central Bank of Nigeria (CBN) has raised concerns over the inflationary risks posed by rising statutory revenue disbursements through the Federation Account Allocation Committee (FAAC), warning that the surge in liquidity could undermine ongoing disinflation efforts.
Speaking in his personal statement released after the 300th Monetary Policy Committee (MPC) meeting held on May 20, 2025, and published on the CBN’s official website, Governor Olayemi Cardoso stressed the need for tighter monetary conditions to avert renewed inflationary pressures.
“We are confronted with increased liquidity injections into the banking system from statutory revenue distributions, highlighting the need for tight monetary conditions to avoid renewed inflationary pressures,” Cardoso stated.
Recent FAAC figures show that a total of ₦1.818 trillion was shared among the federal, state, and local governments in June 2025, representing a 9.6% increase from the ₦1.659 trillion distributed in May.
A breakdown of the June disbursement reveals that:
₦1.018 trillion came from statutory revenue,
₦631.5 billion from Value Added Tax (VAT),
₦29.1 billion from the Electronic Money Transfer Levy,
₦38.8 billion from exchange difference revenue, and
₦100 billion as non-mineral revenue augmentation.
The Federal Government received ₦645.38 billion, state governments got ₦607.41 billion, and local government councils received ₦444.85 billion. Additionally, oil-producing states earned ₦120.75 billion as 13% derivation revenue.
The Office of the Accountant-General of the Federation disclosed that gross revenue for June stood at ₦4.23 trillion, with ₦162.78 billion deducted as cost of collection and ₦2.25 trillion allocated for transfers, refunds, interventions, and savings.
Analysts warn that this increasing liquidity will likely push more naira into circulation, fuelling inflation if not matched with adequate monetary tightening.
The National Bureau of Statistics (NBS) reported that headline inflation eased to 22.22% in June 2025, down from 22.97% in May, marking an 11.97% decline compared to the 34.19% recorded in June 2024. This suggests that the CBN’s aggressive tightening measures are beginning to take effect.
However, month-on-month inflation rose slightly to 1.68% in June, compared to 1.53% in May, indicating renewed upward pressure on prices despite the overall declining trend.
With rising FAAC allocations threatening to inject more liquidity into the economy, the CBN is expected to maintain its hawkish stance in the short term.
Market analysts are divided ahead of the upcoming MPC meeting. A majority believe the committee will retain the Monetary Policy Rate (MPR) at 27.5% for the third consecutive time to consolidate its gains on inflation control.
However, some analysts are predicting a mild rate cut to 27.25% and a possible adjustment of the asymmetric corridor, signalling a gradual policy recalibration to balance price stability with growth concerns.
Cardoso has consistently emphasised the CBN’s commitment to taming inflation, which remains one of the most significant threats to Nigeria’s economic recovery. The governor maintains that while fiscal authorities are increasing revenue disbursements to stimulate growth, monetary policy must remain vigilant to prevent excessive liquidity from triggering another wave of inflation.
If FAAC disbursements continue to rise without corresponding productivity growth, analysts warn that consumer prices could climb further, eroding the purchasing power of Nigerians and complicating the government’s economic reform agenda.