The Central Bank of Nigeria (CBN) has expressed concern that monthly allocations from the Federation Account Allocation Committee (FAAC) are fuelling excess liquidity in the banking system, posing risks to price stability.
Speaking after the 302nd Monetary Policy Committee (MPC) meeting in Abuja, Governor Olayemi Cardoso said the CBN was closely monitoring the fiscal injections that follow FAAC disbursements, warning that they could undermine recent gains in disinflation and exchange rate stability.
“We are a bit concerned about excess liquidity and, in particular, the negative effects of FAAC releases at certain times of the month or of the year. It is something that we are watching very closely, and we will continue to deploy the tools required to ensure that the stability we have attained stays with us into the future,” Cardoso said.
Despite the warning, the MPC lowered the Monetary Policy Rate by 50 basis points to 27%, marking the first cut this year.
Other policy decisions included reducing the Cash Reserve Ratio for commercial banks to 45% from 50%, retaining merchant banks’ CRR at 16%, introducing a 75% CRR on non-TSA public sector deposits, leaving the Liquidity Ratio unchanged at 30%, and narrowing the asymmetric corridor to +250/-250.
The CBN said its cautious easing stance was supported by steady macroeconomic improvements. Headline inflation slowed to 20.12% in August 2025 from 21.88% in July, the lowest in five months, while GDP expanded by 4.23% in Q2 2025. External reserves also rose to $43.05 billion as of September 11, the highest level since 2019, with import cover of 8.28 months.
This was not the first time the CBN governor has expressed concern over the likely impact of FAAC disbursement on inflationary pressure.
Earlier in his personal statement made after the 300th MPC meeting held on May 20, 2025, and published on the CBN website, Cardoso expressed concern over the inflationary implications of rising liquidity levels in the banking system, warning that increasing statutory revenue disbursements through the Federation Account Allocation Committee (FAAC) could undermine the Bank’s disinflation efforts if not counterbalanced by tighter monetary conditions.
The Federation Account Allocation Committee (FAAC) shared a total of N2.225 trillion among the Federal Government, states, and local government councils as revenue for August 2025. This represents an 11.2% increase, or N224.12 billion, compared with the N2.001 trillion distributed for July.
The Office of the Accountant General of the Federation disclosed this in a statement after the FAAC meeting in Abuja.
Naijaonpoint noted that the disbursement marked the third consecutive month of revenue growth, as well as the second time that over N2 trillion was distributed.
According to the breakdown, the distributable revenue for August comprised N1.478 trillion from statutory revenue, N672.90 billion from Value Added Tax, N32.34 billion from the Electronic Money Transfer Levy, and N41.28 billion from exchange differences.
The statement added that total gross revenue available for the month stood at N3.635 trillion, from which N124.84 billion was deducted as cost of collection, while N1.285 trillion was set aside for transfers, interventions, refunds, and savings.
From the statutory revenue, the Federal Government received N684.46 billion, states got N347.17 billion, and local governments received N267.65 billion. Oil-producing states were allocated N179.31 billion as 13% derivation revenue.
The steady rise in FAAC disbursements, driven largely by stronger oil receipts and VAT collections, reflects improved government revenues since June 2025.