Nigeria’s Value Added Tax revenue rose to N1.08 trillion in January following the implementation of a new sharing formula that changes how proceeds are distributed among the federal, state and local governments, according to documents from the Federation Account Allocation Committee.
Data presented at the FAAC meeting and obtained by Nigerian Mirror show that VAT collections by the Nigeria Revenue Service increased from N913.96 billion in December 2025 to N1.08 trillion in January 2026, a rise of N169.20 billion, or 18.5%.
After deductions of N79.94 billion, net VAT available for distribution stood at N1.00 trillion, compared with N846.51 billion in December, also reflecting an 18.5% increase.
January marked the first full month under the revised sharing formula, which allocates 10% of net VAT to the federal government, 55% to states and 35% to local governments. Previously, the federal government received 15%, states 50% and local governments 35%.
Under the new structure, the federal government received N100.32 billion in January, down from N126.98 billion in December. States received N551.77 billion, up from N423.25 billion, while local governments got N351.13 billion, compared with N296.28 billion the previous month.
The new formula reduced the federal government’s share by about N50.16 billion compared with what it would have earned under the old structure, while states gained a similar amount.
The cost of VAT collection also increased. The 4% collection cost rose to N43.33 billion in January from N32.72 billion in December. Other statutory deductions included 3% for the North East Development Commission, totaling N31.20 billion, and 0.5% for the Revenue Mobilisation Allocation and Fiscal Commission, amounting to N5.42 billion.
Total funds available for distribution across all revenue streams stood at N3.04 trillion in January. After deductions of N1.14 trillion, net distributable revenue was N1.90 trillion.
Of this, the federal government received N525.23 billion, states got N767.29 billion and local governments received N517.28 billion, while N90.19 billion was allocated as 13% derivation revenue.
Among states, Lagos recorded the highest VAT allocation. It received N111.22 billion in gross VAT and retained N101.34 billion after deductions, while its local governments got N70.57 billion.
Oyo followed with N24.04 billion, Rivers received N23.57 billion, Kano N17.37 billion and the Federal Capital Territory N15.76 billion. Bayelsa got N15.07 billion, while Katsina, Jigawa, Delta and Kaduna each received between N12 billion and N14 billion.
At the lower end, Ebonyi received N9.45 billion, Taraba N9.37 billion, Ekiti N9.83 billion and Nasarawa N9.77 billion.
Non-import VAT collections totaled N913.47 billion in January, up from N721.83 billion in December, a 26.5% increase. Lagos alone generated N533.40 billion, accounting for more than half of the total.
Projections indicate that states could receive about N5.07 trillion in VAT revenue in 2026 under the new formula, based on estimates in the Medium-Term Expenditure Framework approved by the Federal Executive Council.
However, analysts say higher-than-expected collections could push total earnings beyond projections if the trend continues.
The Nigeria Economic Summit Group warned that maintaining the current VAT rate could lead to revenue shortfalls. Its chief executive, Tayo Aduloju, said the government may lose revenue without a rate increase.
Similarly, the International Monetary Fund said Nigeria could lose up to 0.5% of its gross domestic product in revenue by not raising VAT, though it noted that the decision may help ease pressure on households facing high poverty and food insecurity.
Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, said states could earn more than N4 trillion annually from VAT starting in 2026 under the new framework.
Economic analysts urged states to strengthen internally generated revenue and ensure transparency in the use of increased allocations.
