2024 VAT pool: Here’s how much states contributed and their FAAC allocation

The distribution of value-added tax (VAT) revenue in Nigeria continues to stir controversy, as data from Agora Policy shows a significant disparity between states’ contributions to the VAT pool and their subsequent allocations.

The data, based on figures from the federation accounts allocation committee (FAAC) for 2024, and published on Thursday by the Abuja-based think tank, reignites debates about fairness, fiscal equity, and the need for systemic reform.

Administered by the Federal Inland Revenue Service (FIRS), VAT has been a critical source of non-oil revenue since its introduction in 1993 to replace the Sale Tax, with its sharing formula grabbing headlines recently, as Taiwo Oyedele-led tax and fiscal policy committee proposed a change to ensure fairness in the distribution.

The committee had proposed a VAT-sharing formula of 20 percent based on equality, 60 percent based on derivation, and 20 percent based on population.

However, the Nigeria Governors’ Forum (NGF) rejected the committee’s suggestion and proposed a sharing formula of 50 percent based on equality, 30 percent based on derivation, and 20 percent based on population — which Oyedele said his committee has no objection to.

While implementation is projected to commence in July, the current sharing formula of 50 percent based on equality, 30 percent based on population and 20 percent based on derivation, creates a glaring imbalance.

LAGOS, RIVERS BEAR THE BRUNT

Lagos state, Nigeria’s economic hub centre, contributed N2.75 trillion to the VAT pool in 2024—nearly half of the total revenue generated.

However, the state received just N460 billion in return as VAT share, representing only 16.7 percent of its contribution.

Rivers state, another major contributor, generated N832 billion but received N186.6 billion from the VAT pool, accounting for 22.4 percent of its input.

In contrast, states with significantly lower contributions benefitted more from the redistribution.

For instance, Kano, which contributed N77.7 billion, received N117.1 billion from the VAT pool, while Katsina, with a contribution of just N22 billion, was allocated N85.6 billion.

Abia state contributed N8.68 billion but received N63.78 billion — a 734.8 percent return.

Similarly, Imo state contributed N4.38 billion but was allocated N70.7 billion, reflecting a 1,613 percent return.

VAT DISTRIBUTION ACROSS ZONES

Across the geopolitical zones, the south-west, led by Lagos, contributed N3.11 trillion, accounting for the largest share of the VAT pool.

Despite its major contribution, the zone received only N849.71 billion, representing 27.4 percent of its contributions.

Also, the south-south contributed N1.08 trillion but was allocated N543.49 billion— 50.3 percent of its contributions.

The north-west contributed N211.27 billion to the VAT pool but received N574.32 billion in return, equating to 271.8 percent of its contributions.

The north-east, despite contributing N174.50 billion, received a significant N411.84 billion, amounting to 236 percent of its contributions.

With a contribution of N154.54 billion, the north-central zone received N408.66 billion, translating to 264.4 percent of its input.

The south-east contributed the least (N101.09 billion) but received a hefty N341.46 billion — a 337.8 percent return on its contribution.

Across the regions in Nigeria, southern states, driven by economic hubs like Lagos and Rivers, contributed N4.28 trillion to the VAT pool but received only N1.73 trillion, representing 40.5 percent of their contributions.

In sharp contrast, northern states contributed N540.31 billion yet received N1.39 trillion, an astonishing 258.2 percent return.

Here is how much states contributed to the VAT pool and their FAAC allocation in 2024: