The Pay As You Earn (PAYE) tax contributed approximately ₦1.86 trillion, representing 69.84 percent of total tax revenue generated by Nigeria’s 36 states and the Federal Capital Territory (FCT) in 2024, according to data from the National Bureau of Statistics (NBS).
Tax revenue made up ₦2.66 trillion of the ₦3.63 trillion IGR reported in 2024, with PAYE contributing the majority share at ₦1.86 trillion, confirming its continued dominance among state tax sources.
PAYE Remains the Mainstay of Subnational Taxation
The PAYE system, which involves the deduction of personal income tax directly from salaries and wages of employees in the formal sector, remained the primary revenue source for most subnational governments in 2024.
The NBS attributed the growth in PAYE collections to improved tax compliance, digital remittance platforms, and increased employment in the formal sector, particularly in Lagos, Rivers, and the FCT — which collectively account for more than half of Nigeria’s IGR.
“PAYE continues to anchor state-level revenue performance, reflecting the concentration of formal employment and structured payroll systems in key urban centres,” an NBS official said.
Other Tax Components
Beyond PAYE, other key components of state-level tax revenue include Direct Assessment, Road Taxes, Withholding Taxes, Stamp Duties, and Capital Gains Tax.
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Direct Assessment, which applies to self-employed individuals and small business owners, contributed a modest share, reflecting the challenges of enforcing tax compliance within the informal sector.
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Road Taxes, paid by commercial transport operators, also added to overall collections but remain minor compared to PAYE inflows.
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Capital Gains Tax generated ₦10.57 billion, the least among all categories, while other levies such as market and development fees, gaming licenses, and land registration charges contributed marginally.
Total IGR Rises 49.7% Year-on-Year
Overall, total IGR for Nigeria’s 36 states and the FCT rose to ₦3.63 trillion in 2024, up from ₦2.43 trillion in 2023, reflecting a 49.7 percent year-on-year increase.
Tax revenues accounted for 73.35 percent of this figure, while the remaining 26.65 percent came from revenues generated by state ministries, departments, and agencies (MDAs) providing administrative and commercial services.
Top Performing States
The report identified Lagos, Rivers, and the FCT as the highest-performing subnationals, generating ₦1.26 trillion, ₦317.30 billion, and ₦282.36 billion respectively in 2024.
In contrast, Yobe (₦11.08 billion), Ebonyi (₦13.18 billion), and Kebbi (₦16.97 billion) recorded the lowest IGR during the review period, indicating persistent disparities in fiscal capacity and economic activity among states.
Analysts’ Perspective
Fiscal analysts say the heavy reliance on PAYE reveals both progress and vulnerability within Nigeria’s state revenue systems. While it demonstrates stronger compliance in the formal sector, it also highlights limited coverage of the informal economy — which employs the majority of Nigerians.
“Most states still rely on salaried workers and formal enterprises for tax income,” a financial analyst told Naijaonpoint. “To sustain fiscal growth, there’s an urgent need to expand the tax net to the informal economy through simplified assessment and digital inclusion.”
Outlook
As state governments continue to automate tax administration and implement digital collection systems, PAYE revenue is expected to remain stable in the short term.
However, experts warn that without targeted policies to integrate small businesses, artisans, and informal traders into the tax framework, subnational revenue diversification will remain limited.
The NBS emphasised that expanding the tax base, improving data management, and strengthening revenue transparency are key to ensuring sustainable fiscal growth and reducing dependence on federal allocations.