Nigeria’s Value Added Tax (VAT) revenue climbed sharply to N1.08tn in January 2026, marking an 18.5 per cent increase from N913.96bn recorded in December 2025. The rise coincided with the first full month of a revised VAT sharing formula that now allocates a larger portion of proceeds to state governments.
After deductions amounting to N79.94bn, the net VAT available for distribution stood at N1.00tn, up from N846.51bn in December. Under the new formula, 10 per cent goes to the Federal Government, 55 per cent to states, and 35 per cent to Local Governments. Previously, the Federal Government received 15 per cent, while states got 50 per cent and Local Governments retained 35 per cent.
As a result of the adjustment, the Federal Government received N100.32bn in January, about N50.16bn less than it would have earned under the old structure. In contrast, states shared N551.77bn, reflecting an increase of roughly N50bn compared to what they would have received previously. Local Governments collected N351.13bn.
Compared with December’s figures, the Federal Government’s VAT earnings declined by N26.65bn, while states saw a 30.4 per cent increase in their share. Local Governments also experienced an 18.5 per cent rise.
The cost of collection rose alongside the higher revenue pool. The Nigeria Revenue Service’s 4 per cent collection cost increased to N43.33bn in January, while deductions to statutory bodies such as the North East Development Commission and the Revenue Mobilisation Allocation and Fiscal Commission also increased.
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Overall, total funds available for distribution in January stood at N3.04tn across revenue lines, with N1.90tn shared after deductions. When combined with statutory revenue, the Federal Government received N525.23bn, states got N767.29bn, and Local Governments were allocated N517.28bn.
Lagos remained the highest VAT beneficiary, generating N533.40bn in non-import VAT and receiving N111.22bn in gross allocation. Oyo and Rivers followed, while several other states recorded modest gains. Analysts noted that despite the equality component in the sharing formula, significant disparities persist due to differences in economic activity.
With VAT collections already exceeding projections early in the year, states may earn more than earlier estimates if the current trend continues. However, experts have urged state governments to improve transparency and strengthen internally generated revenue, warning against overreliance on statutory allocations.
