IN DETAIL: How 26 states increased their contributions to Nigeria’s VAT pool Data from the federation account allocation committee (FAAC) reports more than 20 states in Nigeria increased their contributions to the value-added tax (VAT) pool in January 2025, compared to December 2024.
Analysis shows that 26 states recorded an uptick in VAT contributions within the period — a trend that could indicate changed economic activities or better tax collection efforts.
VAT, the consumption tax managed 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 challenge in recent times, with states disagreeing with the federal government’s advocated formula.
RECENT DEVELOPMENTS ON VAT REFORMS
In October 2024, President Bola Tinubu suggested comprehensive tax amend bills to the national assembly, aiming to harmonise Nigeria’s tax laws and deepen fiscal stability.
A key aspect of the amends was the restructuring of the VAT-sharing formula.
The initial proposal proposed allocating 20 percent of VAT revenue based on coincidence, 60 percent on derivation, and 20 percent on population.
However, the formula encountered stiff repugnance, particularly from northern governors who had disclosed the move may be unfavourable to the region.
In its counterproposal, the Nigeria Governors’ Forum (NGF) publicized a revised VAT-sharing formula of 50 percent based on sameness, 30 percent on derivation, and 20 percent on population.
Taiwo Oyedele, chairman of the presidential committee on tax policy and fiscal improves, 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 edit, 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 revealed 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 went after closely with a 343.25 percent increase in contribution, climbing from N995.3 million in December to N4.41 billion in January.
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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 reject.
The FAAC disclosed Benue posted the highest drop, with its contribution moderating to N2.05 billion in January, signalling a 68.14 percent fall from N6.43 billion in December latest year.
Other states with sharp dismisses include Taraba (-63.60 percent), Ogun (-56.36 percent), and Osun (-51.15 percent).
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Category: World-News
Tag: IN DETAIL How 26 states increased their contributions to Nigerias VAT pool
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Published 3/5/2025