IN DETAIL: How 26 states increased their contributions to Nigeria’s VAT pool

Data from the federation account allocation committee (FAAC) says more than 20 states in Nigeria increased their contributions to the value-added tax (VAT) pool in January 2025, compared to December 2024.

TheCable Index analysis shows that 26 states recorded an uptick in VAT contributions within the period — a trend that could indicate improved economic activities or better tax collection efforts.

VAT, a consumption tax administered by the Federal Inland Revenue Service (FIRS), is one of the key revenue sources shared among the three tiers of government through FAAC.

However, the distribution formula has been a subject of dispute in recent times, with states disagreeing with the federal government’s proposed formula.

RECENT DEVELOPMENTS ON VAT REFORMS

In October 2024, President Bola Tinubu proposed comprehensive tax reform bills to the national assembly, aiming to harmonise Nigeria’s tax laws and enhance fiscal stability.

A key aspect of the reforms was the restructuring of the VAT-sharing formula.

The initial proposal suggested allocating 20 percent of VAT revenue based on equality, 60 percent on derivation, and 20 percent on population.

However, the formula faced stiff opposition, particularly from northern governors who had said the move may be unfavourable to the region.

In its counterproposal, the Nigeria Governors’ Forum (NGF) announced a revised VAT-sharing formula of 50 percent based on equality, 30 percent on derivation, and 20 percent on population.

Taiwo Oyedele, chairman of the presidential committee on tax policy and fiscal reforms, expressed no objection to the revised formula.

Addressing the decision of the NGF, Oyedele said reforms anywhere in the world are not just about what is technically correct, as political considerations are also factored in.

STATE VAT CONTRIBUTIONS IN DECEMBER 2024 VS JANUARY 2025

According to data from FAAC, the 36 states contributed a total of N496.72 billion to the VAT pool in December 2024.

The figure increased by 8.94 percent to N541.11 billion in January 2025.

The commission said Kwara topped the list of states with the highest month-on-month VAT increase, contributing N9.53 billion in January 2025 — a 383.41 percent increase from N1.97 billion in December 2024.

Sokoto followed closely with a 343.25 percent increase in contribution, climbing from N995.3 million in December to N4.41 billion in January.

Other states that recorded significant VAT contributions include Edo (342.59 percent), Imo (253.63 percent), and Kebbi (114.12 percent).

While most states recorded an increase, some saw their VAT contributions decline.

The FAAC said Benue posted the highest drop, with its contribution decreasing to N2.05 billion in January, signalling a 68.14 percent fall from N6.43 billion in December last year.

Other states with sharp declines include Taraba (-63.60 percent), Ogun (-56.36 percent), and Osun (-51.15 percent).

The full breakdown of contributions for all 36 states can be found HERE.